Asset-Purchase-AgreementAn asset purchase agreement (APA) finalizes the terms and conditions related to the purchase and sale of a company’s assets.

Elements of An Asset Purchase Agreement Include:

  • Interpretation section which lists the definitions for all major terms used in the overall body of the agreement;
  • Terms of purchase and sale of the stock: lists the purchase price, purchase price adjustments, purchase price allocation (for tax purposes between buyer and seller), and mechanisms for dispute resolution
  • Representations and warranties of parties: lists all of the statements that buyer and seller are representing and signing off to be true
  • Employee matters: provides for employee benefits and provides terms on how accrued bonuses are to be handled once the transaction is finalized
  • Indemnifications: Provides details of all indemnifications for costs that may arise once the transaction is finalized as a result of pre-existing conditions
  • Tax matters: specification of special tax treatment entitles to the seller or buyer
An asset purchase agreement (APA) finalizes the terms and conditions related to the purchase and sale of a company’s assets.
With an asset purchase transaction, a buyer may select to purchase only specific assets and leave behind other redundant assets. These selected assets must be itemized in a schedule to the asset purchase agreement (APA). In an APA, assumed material contracts, like key customer and supplier contracts, must also be assigned (with the consent of the contracting third-party) because unless they are these important business agreements may stay with the selling company.  To that end, a buyer, as part of due diligence for an asset purchase, must ensure that all assigned customer contracts do not have specific clauses prohibiting such contract assignments.