An asset acquisition in China is the purchase of a company by
buying its assets instead of its shares. In China, an asset acquisition may also involve
an assumption of certain liabilities; however, because the parties can bargain over which assets
will be acquired and which liabilities will be assumed, the transaction form can be far more
flexible in its structure and outcome than a merger, combination or shares purchase.
There are many complex factors to consider for asset acquisition in China. The buyer only
acquires the assets and liabilities it identifies and agrees to acquire and assume,
subject to any liabilities imposed on the buyer as a matter of Chinese law. This is
fundamentally different from a shares acquisition or merger where the buyer acquires all the
assets and liabilities (including unknown or undisclosed liabilities) of the target company
as a matter of Chinese law.
The ability to pick and choose specific assets and liabilities provides the buyer with
flexibility. The buyer does not waste money on unwanted assets and there is less risk
the buyer assuming unknown or undisclosed liabilities. However, this also makes asset acquisitions
more complex because the buyer has to spend time identifying the assets and liabilities it
wishes to acquire and assume.
Rather than having to acquire the entire business operation, investors can simply pick and
choose which assets are attractive, take steps to purchase those particular assets, and not have to
deal with any other holdings that may be of no particular interest.
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