medium · Investment Banking ma-lbo

What is the primary difference between a Stock Purchase and an Asset Purchase in M&A?

1. A stock purchase allows the buyer to selectively choose which specific liabilities of the target company it will formally assume at close.
2. Goodwill is only ever created in a stock purchase transaction and is never permitted to arise in an asset purchase.
3. An asset purchase is always accretive to EPS because it structurally avoids the creation of any brand-new acquirer equity shares.
4. In an asset purchase, the buyer can step up the tax basis of assets to fair market value, creating tax-deductible depreciation.

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