Company A wishes to acquire control of Company B as cheaply as possible. For economic reasons, a consultant recommended that Company A can do this through purchase of assets, rather than purchase of shares. Which of the following statements regarding the above scenario is correct?

Question

Quizplus · Accepted Answer

If company A wishes to acquire control of company B as cheaply as possible, then it can choose to purchase assets rather than shares. When acquiring assets, company A only needs to acquire control of company B's net assets (assets minus liabilities) rather than purchasing all of the assets and liabilities. This allows company A to avoid any unwanted liabilities and debts that company B may have. Additionally, there is no requirement for the consideration given by Company A to exceed 50% of the fair market value of Company B's net assets.

Company a Wishes to Acquire Control of Company B as Cheaply