Asset purchase agreement

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Contents of the asset purchase agreement

The seller and buyer (and any guarantor) will enter into an asset purchase agreement, which can become a detailed and heavily negotiated agreement. This sets out the terms on which the sale is to take place, including:

  1. •

    purchase price and payment mechanism, including any provision for deferred (or ‘earn-out’) consideration, payment by way of share consideration and any security or guarantee provisions for the protection of payment of any deferred consideration

  2. •

    conditions precedent to completion, such as regulatory or third party approvals, and the release of bank security over assets used in the target business

  3. •

    arrangements for completion, including executing and handing over ancillary documents (such as assignments, transfer documents and a transitional services agreement)

  4. •

    post-completion restrictions (by way of covenant) on the seller's activities

  5. •

    warranties and indemnities, providing the buyer with recourse against the seller if untrue and inaccurate statements are made with respect to the target business's affairs, and

  6. •

    limitations on the seller’s liability, including time limits for making warranty and indemnity claims and financial limits and thresholds

See Practice Notes:

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