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Structuring Acquisitions

John C. Siegesmund III, Mergers and Acquisitions of Natural Resources Companies (1994)

A business acquisition usually starts with an economic deal. A purchasing company (“P”) decides that for any number of reasons it wants to acquire the business or assets of another company (“T”), and, after a period of courtship, the parties agree on a price. At that point the business people may regard the bulk of their work as done, and leave it to the lawyers to sort out the details. But from the practitioner's point of view, the parties' economic deal is only the tip of the iceberg; below the waterline are numerous issues that can have profound consequences. A small sampling of those issues would include whether P is willing to acquire all of the liabilities of T, known and unknown, whether T has tax attributes that P would like to acquire, whether T has assets that P does not want, whether the parties want or need a tax-free deal, and whether corporate or other laws impose any limitations on the transaction. Structuring an acquisition to account for all these factors is a major part of a transactional lawyer's job.

This paper will outline the major ways of structuring business acquisitions and will discuss the principal tax and business consequences of each form. A word of caution, however, is important at the outset: It would be impossible to list here, much less discuss, every legal nuance that might effect the structure of a business acquisition. Books have bee