The terms of all M&A transactions are set forth in a contract known as the “purchase and sale agreement” between the acquiring and selling parties. The contract can take the form of a stock purchase agreement, asset purchase agreement, tender offer document, or merger agreement. Regardless of the form, the contract contains a number of clauses that are similar in all situations.
M&A transactions can be structured as an asset or stock sales. In an asset sale, the specific assets (and liabilities) being sold (including everything from office supplies to goodwill) are listed in the purchase and sale agreement. Alternatively, the purchase and sale agreement may simply include a general description of the assets being sold (e.g. “all assets used in Target’s business”).