Deal structures matter. Asset sales. Stock sales. Mergers. Each has different implications.
Most owners don’t understand structures. They don’t know differences. They make wrong choices. They face problems.
Structure understanding enables decisions. Asset sale implications. Stock sale implications. Merger implications.
This explainer shows common structures and their implications.
Key Takeaways
- Understand structures—learn deal types
- Know implications—see consequences
- Compare options—evaluate structures
- Choose strategically—select best structure
- Structure correctly—set up deal properly
Table of Contents
Structure Overview
Deal structures define how transactions happen. Asset sales. Stock sales. Mergers. Each works differently.
Structures have implications: Tax consequences. Liability exposure. Complexity levels. All differ.
Structures fit different situations: Each structure has benefits. Each has costs. Each fits different deals.
Why this matters: Structure understanding enables decisions. If you understand structures, decisions improve.
Asset Sales
Asset sales transfer specific assets. Business assets move. Entity stays. Selective transfer.
How Asset Sales Work
Asset sale process:
- Buyer selects assets
- Assets transfer to buyer
- Seller keeps entity
- Selective purchase
Why this matters: Process understanding enables participation. If you understand process, participation improves.
Asset Sale Benefits
What asset sales offer:
- Buyer avoids liabilities
- Selective asset purchase
- Tax benefits for buyer
- Lower risk
Why this matters: Benefit understanding enables evaluation. If you understand benefits, evaluation improves.
Asset Sale Drawbacks
What asset sales cost:
- More complex
- Higher taxes for seller
- Asset-by-asset transfer
- More documentation
Why this matters: Drawback understanding enables evaluation. If you understand drawbacks, evaluation improves.
Pro tip: Use our TAM Calculator to evaluate market opportunity and inform deal structuring. Calculate market size to understand potential.
Stock Sales
Stock sales transfer ownership. Entity ownership changes. All assets transfer. All liabilities transfer.
How Stock Sales Work
Stock sale process:
- Buyer purchases stock
- Ownership transfers
- Entity continues
- Complete transfer
Why this matters: Process understanding enables participation. If you understand process, participation improves.
Stock Sale Benefits
What stock sales offer:
- Simpler process
- Lower taxes for seller
- Complete business transfer
- Faster closing
Why this matters: Benefit understanding enables evaluation. If you understand benefits, evaluation improves.
Stock Sale Drawbacks
What stock sales cost:
- Buyer assumes liabilities
- Less flexibility
- Higher risk for buyer
- Entity continues
Why this matters: Drawback understanding enables evaluation. If you understand drawbacks, evaluation improves.
Mergers
Mergers combine businesses. Two entities become one. Assets combine. Operations combine.
How Mergers Work
Merger process:
- Two entities combine
- New entity created
- Assets merge
- Operations merge
Why this matters: Process understanding enables participation. If you understand process, participation improves.
Merger Benefits
What mergers offer:
- Combined strengths
- Synergy potential
- Shared resources
- Strategic advantages
Why this matters: Benefit understanding enables evaluation. If you understand benefits, evaluation improves.
Merger Drawbacks
What mergers cost:
- Complex process
- Integration challenges
- Cultural issues
- Higher complexity
Why this matters: Drawback understanding enables evaluation. If you understand drawbacks, evaluation improves.
Choosing Structure
Structure selection requires evaluation. Assess situation. Compare options. Choose strategically.
Assess Your Situation
Evaluate your needs:
- Buyer or seller
- Tax situation
- Liability concerns
- Complexity tolerance
Why this matters: Situation assessment enables selection. If you assess situation, selection improves.
Compare Structures
Evaluate options:
- Compare asset sales
- Compare stock sales
- Compare mergers
- Compare implications
Why this matters: Comparison enables decisions. If you compare, decisions improve.
Choose Strategically
Select best structure:
- Match to situation
- Consider tax implications
- Evaluate risk
- Choose wisely
Why this matters: Strategic selection enables success. If you select strategically, success improves.
Pro tip: Use our TAM Calculator to evaluate market opportunity and inform deal structuring. Calculate market size to understand potential.
Your Next Steps
M&A deal structures have different implications. Understand structures, know implications, compare options, choose strategically, then structure correctly to set up deal properly.
This Week:
- Begin understanding deal structures using our TAM Calculator
- Start comparing asset sales, stock sales, and mergers
- Begin evaluating your situation
- Start choosing structure
This Month:
- Complete structure comparison
- Evaluate your situation
- Choose best structure
- Begin structuring deal
Going Forward:
- Continuously evaluate structure
- Adjust as needed
- Structure deals properly
- Complete transactions successfully
Need help? Check out our TAM Calculator for market evaluation, our buying vs. starting guide for comparison, our M&A basics guide for process, and our sell-ready checklist for preparation.
Stay informed about business strategies and tools by following us on X (Twitter) and signing up for The Initiative Newsletter.
Sources & Additional Information
This guide provides general information about M&A deal structures. Your specific situation may require different considerations.
For market size analysis, see our TAM Calculator.
Consult with professionals for advice specific to your situation.
