Mergers and Acquisitions (M&A) vs. Asset Purchase: Understanding the Legal Differences

Why It’s Important to Understand the Differences Between M&A and Asset Purchases

Mergers and acquisitions (M&A) and asset purchases are the main legal instruments used for corporate restructuring. Businesses rely on these mechanisms to expand operations, optimize their structure, or enter new markets. Although both aim to acquire control over a business, M&A and asset purchases differ significantly in their legal nature, tax implications, and legal risks.

Legal Structure of M&A and Asset Purchase Deals

An M&A transaction involves the purchase of shares or ownership interests in a company. This results in universal succession, meaning the buyer inherits both the company’s assets and liabilities.

An asset purchase, by contrast, involves acquiring specific assets such as equipment, real estate, or receivables. In this case, liabilities do not transfer unless explicitly agreed upon in the contract.

Key Legal Differences Between M&A and Asset Purchase

Deal Object:

  • M&A: shares or ownership interests

  • Asset purchase: specific company assets

Transfer of Liabilities:

  • M&A: liabilities transfer automatically

  • Asset purchase: only by agreement

Corporate Procedures:

  • M&A requires board approvals and public disclosures

  • Asset purchase is more flexible and often simpler

Registration Requirements:

  • M&A involves registering the share transfer

  • Asset purchase requires re-registering property rights

Tax Implications and Deal Costs

When choosing between an M&A and an asset purchase, tax implications play a critical role. M&A deals may be more beneficial for the seller if tax exemptions apply. On the other hand, asset purchases can trigger VAT and corporate income tax.

A key advantage of an asset purchase is the ability to allocate the purchase price among individual assets, which can impact depreciation. In mergers, this flexibility is limited.

Legal Risks and How to Mitigate Them

M&A deals carry higher legal risks, as the buyer inherits the company’s full legal history, including debts and litigation. To mitigate these legal risks, we recommend:

  • Conducting thorough due diligence

  • Including warranties and representations in the agreement

  • Signing indemnity and liability limitation clauses

An asset purchase is generally safer but requires reassigning rights and third-party contract approvals.

Industry-Specific and International Considerations

In the IT industry, where intellectual property is crucial, an asset purchase is often preferred. In capital-intensive industries like construction or manufacturing, M&A is more common.

At the international level, M&A transactions may require antitrust approvals and public disclosures. In Russia, certain deals also require consent from antimonopoly authorities under the Competition Law and corporate regulations.

How to Choose the Right Deal Structure

Your choice between M&A and asset purchase should depend on your business goals:

  • Need a licensed business with the existing team? Choose M&A.

  • Concerned about risks and want more flexibility? Go with an asset purchase.

  • Complex ownership structure? Asset sale may be simpler.

  • Licenses are non-transferable? A merger may be required.

In all cases, legal support from experienced professionals and consultation with tax and audit advisors ensures a secure and effective deal.

How to Decide Between M&A and Asset Purchase

M&A and asset purchase transactions are distinct legal tools, each with its own advantages. The success of a deal depends on proper risk assessment, clear business goals, and the right legal structure. DTK Partners provides full legal support for both M&A and asset purchase transactions, considering industry-specific and international regulations.

Get Expert Advice from DTK Partners

Planning a merger, acquisition, or asset purchase? Contact the legal experts at DTK Partners. We offer end-to-end legal support, conduct detailed due diligence, and help you choose the best structure to protect your interests.

📞 Reach out by phone or through our website form to schedule a personalized consultation.