Asset Purchase
An asset purchase is the acquisition of a business by buying its individual assets — customer contracts, software, brand, equipment, staff — and chosen liabilities from the company that owns them, leaving the legal entity and everything not listed behind with the seller. It is the alternative to buying the company's shares.
- Also known as
- Asset deal, Business transfer, Asset purchase agreement, APA
- Used at
- when the buyer wants part of a business, or wants to leave its history behind
- Binding
- yes, from signing of the asset purchase agreement
- What transfers
- only what the agreement lists; each contract may need its counterparty's consent
- Regulatory
- a licence does not transfer; the buyer needs its own authorisation before it can run the business
- Parties
- the buyer and the selling company (not its shareholders)
How an asset purchase works in practice
An asset purchase is chosen for two reasons: the buyer wants only part of what the seller has, or the buyer does not want the seller's past. A software company buying the technology and the team of a struggling payments start-up, but not its licence, its regulatory history or its liabilities, buys the assets. A large group selling one product line out of a company that runs several sells the assets — that is a carve-out.
The cost of the choice is that nothing moves by itself. Every customer contract has to be assigned, and many contracts — merchant agreements and bank partnerships above all — require the counterparty's consent to assignment, which gives each of them a moment to renegotiate or leave. Employees transfer under TUPE in the UK and its equivalents elsewhere, with their terms intact. Intellectual property is assigned by deed. And the licence stays where it was: a buyer without its own authorisation cannot run a payment business it has bought as assets, which is why asset deals in regulated fintech either go to an already-licensed buyer or wait for a new authorisation.
The buyer gains a clean start and a step-up in the tax basis of the assets, which it can depreciate; the seller is left with an entity that has cash, remaining liabilities and, often, a licence to surrender or to sell separately.
Example
A licensed acquirer buys the merchant portfolio, the checkout software and 22 staff of a smaller competitor for €9m, leaving the seller's company, its e-money licence and a pending regulatory complaint behind. Of 640 merchant contracts, 590 assign on notice, 38 need consent (31 give it, 7 leave, taking €140,000 of annual revenue), and 12 have expired. The purchase price allocation puts €5.2m on customer relationships, €2.1m on software, €0.3m on equipment and €1.4m on goodwill. The seller surrenders its licence six months later.
Common mistakes
- Assuming the licence comes with the assets — it never does. - Listing the assets and forgetting the contracts that need consent, then losing the customers who use the consent to leave. - Taking on liabilities by conduct: a buyer that keeps paying a supplier under the old contract may have adopted it. - Underestimating the transfer work: an asset deal with 600 contracts is 600 small deals. - Ignoring VAT and transfer taxes, which apply to assets and rarely to shares.