Legal Blog

M&A Nugget: The Stock Purchase Wins

Conventional thinking is that an asset purchase structure is more advantageous to a purchaser than a stock purchase.  If several factors exist, however, a stock purchase is more attractive. See below:

  1. If the seller has tax losses or other tax items that can be carried over and used in the future, a stock purchase would allow the purchaser to utilize those tax benefits;
  2. The seller may have key contracts, especially government contracts, that cannot be transferred in an asset purchase but that can be indirectly transferred to the purchaser in a stock purchase;
  3. Or, certain key contracts may require the consent of a third party to be transferred in an asset purchase, and the consents may be difficult to obtain; and
  4. Since a stock purchase allows the seller to enjoy a lower capital gains tax rate on the purchase price, and denies the purchaser many tax benefits of an asset purchase, there is an opportunity to negotiate a lower purchase price on a stock purchase.

If all of the above factors exist, then think stock purchase.





If you have any questions about this or any other M&A issue,
please contact Glenn Solomon at or 443-738-1522.



Glenn D. Solomon is a principal at Offit Kurman and has provided counsel to businesses and business owners for more than twenty-five years. He has extensive experience in the purchase and sale of businesses, structuring ownership agreements, and advising companies in financial distress.









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