Kansas Sale of Business - Retained Employees Agreement - Asset Purchase Transaction
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FAQ
An asset purchase agreement is exactly what it sounds like: an agreement between a buyer and a seller to transfer ownership of an asset for a price. The difference between this type of contract and a merger-acquisition transaction is that the seller can decide which specific assets to sell and exclude.
If the merger or acquisition is the result of a stock purchase and employees are absorbed by the new entity, any current employment forms may remain intact unless substantive changes need to be addressed (e.g., policy changes, benefits changes, nondisclosure agreements, change in job duties or pay).
At the closing of an asset purchase, employees of the seller are generally terminated as employees of the seller, and after closing, those employees are rehired by the purchaser.
Parts of an Asset Purchase AgreementRecitals. The opening paragraph of an asset purchase agreement includes the buyer and seller's name and address as well as the date of signing.Definitions.Purchase Price and Allocation.Closing Terms.Warranties.Covenants.Indemnification.Governance.More items...
In an asset purchase, the buyer will only buy certain assets of the seller's company. The seller will continue to own the assets that were not included in the purchase agreement with the buyer. The transfer of ownership of certain assets may need to be confirmed with filings, such as titles to transfer real estate.
Mergers and acquisitions tend to result in job losses for employees in redundant areas in the combined company. The target company's stock price could rise in an acquisition leading to capital gains for employees who own company stock.
Unlike stock purchases, employees generally do not transfer automatically in an asset purchase, meaning the buyer must expressly assume employment agreements and restric- tive covenants with the acquired personnel; any anti-assign- ment or change-in-control clauses in the acquired employees' employment contracts could
Provisions of an APA may include payment of purchase price, monthly installments, liens and encumbrances on the assets, condition precedent for the closing, etc. An APA differs from a stock purchase agreement (SPA) under which company shares, title to assets, and title to liabilities are also sold.
While buyer's counsel typically prepares the first draft of an asset purchase agreement, there may be circumstances (such as an auction) when seller's counsel prepares the first draft.
The employees who are employed by the target entity will generally come with the transaction, like a stock purchase. If certain employees at the seller/parent company provide significant services to the target entity, then the transaction will act like an asset purchase with respect to this group of employees.