An Asset Purchase Agreement (APA) is the binding contract that documents the sale of specified assets and assumed liabilities of a business from a seller to a buyer. It defines which assets transfer, which liabilities the buyer assumes, the purchase price and payment mechanics, and the representations both parties make about the deal
The choice between an asset deal and a stock deal shapes tax treatment, liability exposure, and third-party consent requirements. The APA is where that structure becomes enforceable. Buyers often prefer asset purchases because unwanted liabilities can be left behind and acquired assets can be stepped up for tax purposes. Sellers usually prefer stock sales for a cleaner exit and capital-gains treatment. The APA is the document where these competing preferences get resolved in line-by-line language.
The schedules list every asset transferred and every liability assumed. Anything not scheduled stays with the seller. Common categories include tangible property, intellectual property, contracts, permits, customer lists, and receivables. Excluded assets and excluded liabilities are listed with the same level of specificity.
The headline number is rarely the cash that changes hands at closing. The APA defines:
The seller makes factual statements about the business: financial accuracy, litigation status, tax compliance, ownership of IP, employee matters, and more. These reps anchor the indemnification regime if anything turns out to be untrue.
Defines what each side will cover if reps are breached. Key levers: caps, baskets (deductible-style thresholds), survival periods, and exclusions for fraud or specific known issues.
Conditions that must be satisfied before either party is obligated to close — regulatory approvals, third-party consents, no material adverse change, accuracy of reps at closing.
Pre-closing covenants govern how the business is run between signing and closing. Post-closing covenants cover non-competes, non-solicits, transition services, and tax cooperation.
A regional logistics company sells its three Texas distribution centers to a private equity-backed buyer for $74M. The APA carves out the seller’s California operations and any litigation pre-dating closing, transfers 240 employees under new buyer offers, and includes a $7.4M indemnity escrow held for 18 months. The working capital peg is set at $9.2M with a dollar-for-dollar adjustment, and the buyer assumes only the equipment leases and customer contracts listed on Schedule 2.4.