What Does Acquisition Structure Mean?
An acquisition structure refers to the overall framework upon which the purchase/sale of a company will be structured. Fundamentally, the acquisition structure breaks down the company's enterprise value into the cash component and the non-cash consideration components. Non-cash consideration may include rolled equity, vendor take backs, earnouts, etc.
In addition, the acquisition structure will also specify if the transaction is a share or asset deal; what assets are being included and excluded; and sets any other material terms, conditions, stock options (if any) and other post-acquisition arrangements that would affect the buyer and the seller.
Divestopedia Explains Acquisition Structure
An acquisition arrangement can be structured in different ways depending on the buying or selling objectives, immediate deliverables and long-term goals of the parties involved. Share transactions involve buying the complete business entity, inclusive of future liabilities, loans and receivables. A sold entity may remain as a subsidiary or the wholly owned subsidiary of an acquiring company, or may be amalgamated at the closing date.
Alternatively, asset acquisitions normally involve purchasing only the valuable assets, whereas the legal entity of the selling company may be kept intact. Valuable business assets include buying only the ongoing/running business which can be the physical inventory, any plants, customer lists, brands, patents, trademarks, product/trade names, property and intangible assets.
Certain acquisition structures can provide tax advantages. When completing asset transactions, the buyer is typically entitled to future tax deductions through higher tax depreciation and possibly tax losses carried forward which can offset future taxable income.