An asset purchase agreement (APA) is the name of the legal document used when purchasing assets of a company. This document is also commonly referred to as a “business purchase agreement.”
The agreement serves as a contract between a buyer and seller which finalizes the terms and conditions involved in the sale of a company’s assets. This contract is necessary to protect each party from liability and dictate terms and conditions of the sale.
This article provides information on asset purchase agreements and what terms and conditions should be listed within the document.
Asset Purchase Agreement Template
This type of written agreement is usually fairly extensive in order to protect each party from potential liabilities. To provide an example, here’s a link to an asset purchase agreement PDF. In this example, the agreement is between a hospital and healthcare company based in Garden City, Michigan.
This contract generally begins with the following type of language:
THIS ASSET PURCHASE AGREEMENT (the “Agreement”), dated as of [Date] is by and between [Name of Seller] (“Seller”), and [Name of Buyer (“Purchaser”).
WHEREAS, upon the terms and conditions of this Agreement, Seller desires to sell, assign, transfer, convey and deliver to Purchaser, and Purchaser desires to purchase, the Purchased Assets, and assume the Assumed Liabilities.
NOW, THEREFORE, for and in consideration of the premises, and the agreements, covenants, representations and warranties hereinafter set forth, and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties agree as follows:
Types of Assets
Asset purchase agreements shouldn’t be confused with a merger or acquisition where a company is essentially selling all of their assets or a stock purchase agreement (SPA) where a company’s shares are being sold. This also shouldn’t be confused with a purchase and sale agreement that’s used during the sale of a home.
Examples of assets that could be found in an APA include:
- Construction companies purchasing machinery such as cranes
- Hospitals purchasing medical supplies and equipment
- An oil company purchasing an oil rig
- Industrial company’s buying machinery
- IT companies purchasing hardware or software
- Businesses purchasing supplies or electronics such as LED lighting
Terms and Conditions
The terms and conditions outlined within a business asset purchase contract can be quite extensive depending on the types of assets being sold. With that said, the key objective within this contract is to define and control behavior.
For example, the seller is required to represent that the asset being purchased is equal to the value and that they are not in debt or legal trouble during the time of purchase. Generally, these contracts also include detailed terms involving the transfer of liabilities to the buyer.
Business Purchase Agreement Lawyer
As a business law firm that specializes in mergers & acquisitions, Hoeg Law has extensive experience in providing legal counsel for both buyers and sellers in business transactions. This includes transactions between large corporations, as well as small business purchase agreements. Our law firm consistently drafts, negotiates, and reviews these agreements along with other business contracts.
If you have legal questions involving the sale of business assets or other legal matters pertaining to business law in the State of Michigan, contact Hoeg Law for a free consultation.