In September 2013, Microsoft announced that it had acquired Nokia’s devices, services, patents and licenses for a total of €5.44 billion in cash.
With so much of Nokia being tied up in its phones and patents, you might be forgiven for wondering why Microsoft didn’t just buy the company outright.
When buying a business, the decision whether to structure the transaction as an asset purchase or a purchase of common stock is an extremely important consideration. On the surface, many company acquisitions appear to be straight common equity purchases until further investigation reveals that the buyer has just purchased the target’s assets and selected liabilities.
If you were to type “[company name] acquired the assets” into Google, you’d find it’s remarkable how many companies aren’t acquired at all - their assets are (Microsoft seems to have a particular preference for this form of transaction). Below we outline some of the differences between both and in which circumstances each should be chosen. Note that this article takes the perspective of a buyer rather than a seller, each of which will benefit differently in each form of acquisition.