Asset Purchase Agreement Commentary

by Practical Law Corporate & Securities

A Practice Note that provides an overview of the key provisions and structure of a typical asset purchase agreement, the primary transaction document for an asset acquisition. This Practice Note examines the core components of the agreement, including the purchase and sale section, which details the purchase price, forms of consideration, and mechanisms for adjustments and earn-outs. It explores the negotiation and function of representations and warranties, post-closing covenants, and critical closing conditions. The note also addresses the allocation of risk between parties through indemnification provisions, discussing common limitations such as caps and baskets, and the increasing use of representation and warranty (R&W) insurance. Additionally, this Practice Note covers related legal considerations such as successor liability, bulk sales laws, employee matters under the Worker Adjustment and Retraining Notification (WARN) Act, and the mechanics of transferring different asset types, including intellectual property and real property. This resource provides guidance on key negotiation points to help counsel navigate the complexities of an asset deal.