Asset Purchase Agreement (APA)
An Asset purchase agreement (or “APA”) is a contract in which the terms and conditions relating to the sale and purchase of assets in a company are laid down. Key provisions are the specified description of the assets, the price and details of the buyer and seller.
APA vs SPA in the Netherlands
A company in The Netherlands can be purchased in two ways: “as a whole” (share/stock purchase) or in parts (asset purchase). If a buyer seeks to purchase the whole Dutch company he can buy the shares in the company via a Share Purchase Agreement (SPA). All assets and liabilities will stay in the company. The company will change ownership.
Cherry-picking the desired assets
However, a buyer may also be only interested in certain assets of the seller’s company. Then an Asset Purchase Agreement is more suitable. Under Dutch law parties and their lawyers can define which assets are included in the sale and which are not. Think of assets such as stocks, machinery and premises. Even intangible assets like know-how, contracts and goodwill can be purchased separately. Assets which are of little or no value to the buyer and liabilities and debts can be easily excluded from the acquisition. This ability to cherry-picking is the main benefit of an asset purchase agreement over a share purchase agreement.
Itemisation of assets
An APA will usually include provisions such as guarantees, representations and warranties of parties, payment schedules and closing conditions. An essential component of the Asset Purchase Agreement is the itemisation schedule of the purchased assets. Only the assets on the schedule will be transferred.
Due diligence before signing an APA
The Asset Purchase Agreement serves as the final contract after a proces of negotiations about the assets to be sold. Once the Asset Purchase Agreement is signed, parties are bound to transfer the assets and to pay the purchase price. A buyer has to consider carefully which assets to include and which not. Therefore it is likely that an Asset Purchase Agreement is preceded by a due diligence in which the condition and possible risks of each asset is established.