In the context of a merger or acquisition transaction, asset sales agreements have a number of advantages and disadvantages compared to the use of an equity (or share purchase) or merger agreement. In the event of a capital acquisition or merger, the buyer receives all the assets of the target entity without exception, but automatically assumes all the liabilities of the targeted entity. In addition, a contract for the sale of assets not only allows for the transfer of part of the assets (which is sometimes desired), but also allows the parties to negotiate the commitments of the objective expressly assumed by the buyer and allows the buyer to leave behind liabilities that he does not want to accept (or of which he knows nothing). One of the disadvantages of an asset sale contract is that it can often lead to a greater number of change of control issues. For example, contracts held by a target entity and acquired by a buyer often require the counterparty`s agreement as part of an asset agreement, whereas it is less common for such consent to be required in connection with a share sale or merger agreement. The oil and gas industry does not distinguish between an asset and a share purchase when designating the associated sales contract. In this sector, whether it is a purchase of assets or shares, the final agreement is called a purchase and sale agreement (PSA). While each acquisition is different from another, there are several important provisions that should always be included in the agreement. Among these provisions are business purchase agreements – also known as share purchase agreements, this type of agreement oversees an acquisition by which the buyer acquires ownership by purchasing at least the majority of the company`s shares. As soon as they are majority shareholders, the company that takes control of the company, including the obligations and debts of the company. Here are a few things that are not included in the agreement: you should always seek advice from an experienced business lawyer when determining the nature of the desired sales contract and creating a sales contract that completely protects your rights.
For the success of the M&A process, it is essential that the selling company hire a consultant who specializes in these transactions. The legal team should include not only lawyers who are experts in mergers and acquisitions, but also experts in relevant areas (tax legislation, real estate, intellectual property, new technologies, data protection, jurisdiction, administration, etc.). However, the seller`s bargaining power is most important on the eve of signing a memorandum of understanding or roadmap. Although these documents are not binding on the trading conditions, they are extremely important to ensure the likelihood of a favorable agreement for the seller. Once the Memorandum of Understanding is signed or the Term Sheet, the buyer`s inactivity will be opened through the Letter of Intent. In this section, both the buyer and the seller must provide facts called “assurances” and then “guarantee” that the statements are true. It is also one of the most important and lengthy elements of the agreement and is the subject of very thorough negotiations. .