As the name implies: asset acquisition is the acquisition of assets, and equity acquisition is the acquisition of equity.
Whether it is an asset acquisition or an equity acquisition mainly depends on what the buyer wants to buy: whether it is an asset or something other than an asset (such as personnel, business systems, etc.). What the seller wants to sell: Does it simply want to sell the asset (such as streamlining part of its non-main business) or the entire company. The final operation depends on where the buyer and the seller can achieve common interests.
Asset acquisition and equity acquisition have no absolute advantages or disadvantages. First of all, it depends on the needs of buyers and sellers. If the buyer needs the seller’s assets, it’s usually an asset acquisition. If the buyer needs the seller’s talents or business, it’s usually an equity acquisition (such as Internet company acquisitions are usually equity acquisitions, because assets are often not the most important part of the company. ). Second, look at the legal obstacles in the process of realization. There may be legal obstacles in the transfer of some assets, such as mining rights and land use rights in certain areas. If the direct transfer requires various complicated approvals, then if these assets are placed in a shell company, the indirect transfer can be avoided to a certain extent through the transfer of equity.
In addition, generally speaking, the legal relationship of the acquisition of assets is simple, and the acquisition of equity may also involve hidden liabilities, litigation and other potential problems. Similarly, there may be legal obstacles to the transfer of equity in some companies (such as certain state-owned or foreign shares). If you want to transfer part of the business, it may be easier to transfer operating assets.
The third is tax considerations. If asset transfer and equity transfer can achieve the same substantive meaning and are legally feasible, you can see which method can be used to pay less tax. Generally speaking, it is easier to avoid tax through equity transfer. To sum up, the two types of acquisitions do not have absolute advantages and disadvantages, mainly from the three aspects of the needs of both parties, legal obstacles, and taxes.