Stock & Asset Sales, Mergers, & Joint Ventures

STOCK & ASSET SALES

Stock purchase agreements are crucial corporate contracts used to transfer equity interests in corporations, limited liability companies, and other forms of corporate entities. Asset Purchase Agreements are crucial contracts used by companies to acquire all or a portion of a companies’ assets. Unlike Stock Sales, an Asset Purchase Transaction does not involve the transfer of equity in the business. Whether you are seeking to acquire or sell assets or acquire or sell equity, The DeBaltzo Law Firm has in-depth knowledge of the pros and cons of each transaction type. We’ll work with you to determine which agreement best suits your unique circumstances and cater it to offer you the most protection possible.

Stock Purchase Agreements

A Stock Purchase Agreement is a common type of merger and acquisition contract that allows one company to assume control of another by purchasing all or the majority of its stock from individual shareholders. Since the legal entity and its ties remain intact after sale, the owner assumes all of the company’s existing liabilities and controls the company. A general Stock Purchase Agreement will contain the following terms and conditions:

• Number of shares being sold and their value
• Date and location in which the transaction will take place, called the “closing.”
• Statements made by the seller regarding past and present facts related to the business (aka Seller’s Representations and Warranties), including inventories, intellectual property issues, contracts, title to property, taxes liabilities, consents and approvals, licenses and permits, customer and supplier lists.
• Employee issues, such as bonuses, benefits and other labor issues.
• Environmental Representations and Warranties
• Required and prohibited actions to occur between signing and closing
• Seller-provided indemnification.

Asset Purchase Agreements

In an Asset Purchase Agreement, the company sells all or certain designated assets to a third party. The benefit of an Asset Purchase Transaction is that a Buyer does not assume any of the liabilities associated with the assets. Instead, the liabilities are generally retained by the Seller. Examples of transferred assets include:

• Trademarks and copyrights
• Contracts
• Physical and intellectual property
• Inventory
• Vehicles, machinery, and other equipment
• Permits, licenses, and insurance policies
• Goodwill

When you purchase only the companies assets, a buyer can exclude liabilities, leave out unfavorable contracts, and avoid any pending lawsuits.

MERGERS & JOINT VENTURES

Both mergers and joint ventures involve two or more companies. The DeBaltzo Law Firm can advise whether a merger or joint venture is appropriate to your situation and draft the key agreements in a way that best represents and protects your business’ interests.

Mergers

A merger is a voluntary agreement between two or more existing companies that are roughly equal in size to merge or combine. At the conclusion of the Merger, one of the companies will merge out of existence and the surviving company will proceed by integrating the dissolved company into its operations. Usually, the dissolving entity will receive shares of stock or membership units of the surviving entity as part of the transaction based upon a formula agreed to by the parties in a Plan and Agreement of Merger. The DeBaltzo Law Firm can advise you on the best approach and documentation required to effectuate your merger. Two of the most common mergers are below:

1. Horizontal mergers. Horizontal mergers occur between companies that compete in the same industries and offer similar products or services. This is essentially the consolidation of two or more competitors into one large company, which greatly increases their market share, reduces competition, and creates more efficient economies of scale. Offering a wider range of products and services with the goal of increasing revenues.
2. Vertical mergers. This type of merger occurs between companies in the same industry that are at different stages in the production process, such as the union of a manufacturer and distributor. Doing so secures access to needed supplies and thus lessens the supplies available to competitors. A vertical merger improves efficiency and productivity because the individual companies no longer need to find suppliers, negotiate deals, or pay full price for supplies.

Joint Ventures

A joint venture agreement forms a partnership between two or more companies as a new legal entity, such as a corporation or LLC, while keeping each individual party’s business operations separate. Although the companies benefit separately, they still share the risks, profits, and losses involved. Each company maintains ownership of the new legal entity for a specific period of time or until the business objective of their partnership has been accomplished. The temporary nature of JVs requires less commitment and offers a more limited scope than mergers.

The DeBaltzo Law Firm will ensure the creation of a comprehensive and detailed JV agreement that clearly explains the following details:

• The name, specific business goal, and term length of the joint venture
• How profits and losses will be shared
• Ownership rights of each party
• The investments and contributions made by each party, such as cash, assets, and property
• How confidential information will be shared between parties
• Dispute resolution procedures
• Currency conversion and import policies (if the joint venture is international)
• How assets will be distributed upon the conclusion of the joint venture
• Early termination provisions