An M&A deal structure practically refers to the terms and conditions of the merger and acquisition deal, a binding agreement between the participants of the deal that contains the rights and the obligations of the involved parties.
Deal structuring is an essential part of any M&A transaction, the part that involves the establishment of the priorities of each of the participants. If you are wondering how to sell your business, there are three common ways to structure an M&A deal:
- Asset acquisition – with this structure, the buyer purchases the assets of the seller. The buyer can choose which assets they want to buy and the seller continues to be a corporate entity and the owner of the remaining assets;
- Stock purchase – in this structure, the buyer does not purchase any assets directly. What changes hands is the seller’s shares, which means that the buyer takes control over the seller’s assets as well as their liabilities;
- Mergers – the concept is often used as an interchangeable term of acquisition, but it refers to a deal in which the two participants agree to form a new corporate entity. In this structure, all the assets and liabilities are transferred to the new entity. The process is usually simpler and easier than in the case of the two other structures.