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Simple English definitions for legal terms
asset purchase
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A quick definition of asset purchase:
Asset Purchase: When someone buys all the things that belong to a company, like its buildings, equipment, and products, instead of buying the company's shares from its owners. This is different from buying shares because the buyer is not becoming an owner of the company, but is just taking over its things.
A more thorough explanation:
Definition: An asset purchase is when a company buys all the assets of another company directly from the company itself, instead of buying shares from its shareholders.
For example, if Company A wants to buy Company B, they can either buy all the shares of Company B from its shareholders (share acquisition) or buy all the assets of Company B directly from the company (asset purchase). In an asset purchase, Company A would own all the physical assets, intellectual property, and contracts of Company B.
Another example of an asset purchase is when a small business owner wants to expand their business by buying the assets of a competitor who is going out of business. The small business owner can buy the competitor's equipment, inventory, and customer list through an asset purchase.
Asset purchases are a common way for companies to acquire the assets they need to grow their business without taking on the liabilities of the company they are acquiring. It allows the acquiring company to pick and choose which assets they want to acquire and leave behind any unwanted liabilities.