Most people hear "M&A" and think "mergers and acquisitions." But in reality, the majority of M&A deals are acquisitions.
When it comes to buying a business, you typically have two options: an asset purchase or a stock purchase. Asset purchase, like handpicking your favorite items at a buffet, allows you to choose what you want and leave the rest behind. It's a buyer's paradise, right?
However, sometimes, the best path isn't the obvious one. Buyers often overlook the potential benefits of a stock deal.
Let me share a real story: a client of mine set out to acquire a software company's assets. But as they delved into the documents, they unearthed some 20,000+ non-assignable contracts. Renegotiating them all would be difficult and time-consuming.
So… Instead of doing an asset purchase, the buyer bought the stock. A smart move, as they could take over contracts without the hassle of renegotiation and without having to do 20,000+ separate assignments.
Adaptability is key in M&A, and in life. While there are some rules of thumb – like an asset sale is better for the buyer – there are always exceptions.