Mergers and Acquisitions Certification Practice Test 2025 – All-in-One Exam Prep

In an asset deal, the buyer typically purchases specific assets of the target company rather than the company itself. This selective approach allows the acquiring entity to avoid certain liabilities associated with the target company's operations, particularly those that are not tied to the assets being acquired.

A class-action lawsuit alleging age discrimination represents a potential liability that the buyer could avoid in an asset deal. Legal claims such as these are generally associated with the company's past actions and can be very complex. Since the buyer is only purchasing specific assets and not the company as a whole, they are not automatically liable for these sorts of claims unless they specifically agree to take on those liabilities or if local laws dictate otherwise.

In contrast, contracts with long-term suppliers, outstanding loans from financial institutions, and all debts incurred before the acquisition are typically obligations that remain with the selling company. Unless explicitly agreed upon, these liabilities do not transfer to the buyer in the asset acquisition, and therefore, they remain with the seller. Thus, the potential to avoid ongoing lawsuits makes the class-action suit the most clear example of a liability that can potentially be sidestepped in an asset deal.