As one of the more common examples of buyout strategies in use today, an asset acquisition focuses on acquiring control of one or more assets of a company, without necessarily planning to get control of the company proper. Generally, this involves going after specific assets or holdings of the company, rather than attempting to gain control of the assets by purchasing a majority amount of the shares issued by the company. Here are some examples of when an asset acquisition may be the most productive manner of acquiring assets currently under the control of another company.
One of the most common uses of the asset acquisition model is to gain control of the assets of a company that is either in bankruptcy or is about to enter bankruptcy. Because the financial stability of the company prevents it from being attractive to investors, the focus will be on creating some source of revenue by selling off assets that are not directly involved in the operations of the company. For instance, a real estate company that focuses on leasing corporate offices may need a fast infusion of cash to avoid going bankrupt. One of their assets is a residential apartment complex. Since the apartment complex is not a central component of their business model, an outside investor may choose to make an equitable offer for the ownership of the apartments. The investor does not tie up funds in the shaky financial affairs of the real estate company, but does acquire an asset that is considered desirable.
Another instance in which this sort of buyout strategy may be attractive is when an investor wishes to establish a business with a ready made operation facility. In this scenario, the investor may approach a similar company that is not as financially stable as it once was, and purchase an entire operating plant and its contents. The end result is an instant production facility that is already fully equipped and ready to process goods. In many cases, the employees of the facility are given the chance to remain in their current positions, just under the new ownership. This type of asset acquisition strategy effectively removes a viable manufacturing operation from the ownership of a company that is failing and places it under the auspices of an organization that will be able to make good use of the resources.
Asset acquisition allows buyers to pick and choose which assets are attractive, without having to assume any of the liabilities or deal with any of the negative factors associated with the current owner. In some cases, the use of this strategy can often mean not only a beginning of a new enterprise for the buyer, but also a second chance for the recovery of financial stability for the seller.