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

Question

Quizplus · Accepted Answer

If A Inc chooses to acquire B Company through a purchase of assets, then A only needs to acquire control of B's net assets (assets - liabilities) as opposed to purchasing all of B's assets and liabilities. This allows A to effectively cherry-pick the most desirable assets and avoid assuming any unwanted liabilities. The consideration given by A does not need to exceed 50% of the fair market value of B's net assets - this is only a requirement for a purchase of shares to trigger a change in control.

A Company Wishes to Acquire Control of B Company as Cheaply