How Much Does a Asset Purchase Agreement Cost?
According to Based on ContractsCounsel’s marketplace data, the average cost of a project involving an asset purchase agreement is $1090.00 [1].
What is an Asset Purchase Agreement?
An asset purchase agreement is a legally binding contract between a buyer and seller. Asset purchase agreements outline the term of the purchase, and include terms like the purchase price, closing terms, warranties and more. Asset purchase agreements differ from entity purchase agreements because a buyer is simply buying assets, as opposed to also acquiring the business entity and its shares.
Getting help from an asset purchase agreement lawyer to draft an APA is highly encouraged since these contracts are the backbone of an acquisition, which can typically be complex. Asset purchase agreements are also important to clearly outline terms between the buyer and seller to avoid future disputes during the transaction or after it closes.
Asset purchase agreement costs depends on how complex the deal is, which includes the types of assets being acquired, the location of the buyer and seller, and the number of custom terms needed to be included in the document.
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What’s Typically Included in an Asset Purchase Agreement
Below are the key terms that are typically included in an asset purchase agreement.
- Recitals. Buyer and seller name with addresses with the date of signing.
- Definitions. Defines the key words used in the contract over and over with definitions of what they mean.
- Purchase Price. The price the buyer and seller have negotiated to purchase the asset(s).
- Closing Terms. The closing terms define what is required to complete the business asset’s purchase or sell, including any terms and contingencies.
- Warranties. Warranties are the representations associated with the purchase. If the seller makes unfounded guarantees, this section is critical for the buyer to pursue legal redress.
- Covenants. Sub-agreements made under the asset purchase agreement.
- Indemnification. It describes the financial damages that one party pays to the prevailing party and under what circumstances, including attorneys’ fees, court costs, and more.
- Governing Law. The State laws that will be governing the agreement.
- Signatures. Signatures of both the buyer and seller.
Common Types of Asset Purchases
An asset purchase is when a buyer decides to purchase certain assets from a company. The types of assets can vary dramatically, and the decision to only purchase assets can be to limit the purchase of liabilities that may come with an entity purchase.
For an entity purchase, a buyer will also inherit tax liability, existing contracts, vendor relationships, and other types of potential liabilities that entity may have. For those reasons, an asset purchase may be more attractive to buyers if they are online interested in acquiring the assets of a company Below is a list of the different types of asset purchases:
- Equipment
- Intellectual Property
- Technology & Software
- Social Media Accounts
- Property
- Licenses
Examples of Asset Purchase Agreement Projects
Asset Purchase Agreement Drafting Service
Many business owners will hire a knowledgeable acquisitions lawyer to consult on a deal and draft their asset purchase agreement. They may even ask the lawyer to create a letter of intent, bill of sale, and other documents that are traditionally involved in an acquisition. This is where the buyer incurs asset purchase agreement costs.
Asset purchase agreement drafting projects will include a consultation by the lawyer to learn about the potential transaction and assets in scope. The lawyer will also want to learn about any key terms the buyer will require in their purchase agreement, which can include payment and closing terms. Asset purchase agreement costs can vary based on how many custom terms need to be included in the agreement.
Reasons you may need to find a lawyer to draft an asset purchase agreement include:
- Acquiring Software. You may be interested in buying a software from an existing business, but not wanting to buy the business itself.
- Buying Intellectual Property. You may be interested in a piece of intellectual property that is in a businesses’ portfolio.
- Acquiring Machinery & Equipment. You may be interested in acquiring property from a business that may be planning to shut down.
- Buying an eCommerce Store. You may have interest in buying an eCommerce store and its inventory, but not buying the actual business.
Asset Purchase Agreement Review Service
Traditionally, buyers provide the seller an asset purchase agreement to review when trying to close a transaction. In this case, the seller will want to hire a business lawyer to help review the proposed asset purchase agreement to make sure their interests and rights are protected. Before signing, you will want to work with a lawyer to discuss the terms of the potential transaction to make sure everything is accurately reflected in the agreement.
Reasons you may need to find a lawyer to review an asset purchase agreement may include:
- Selling Your Inventory. You may be closing your retail store and find a buyer willing to purchase your existing inventory to try and recoup as much money as possible.
- Selling Your Software Startup. A founder may lose interest in their project or have a life change that would lead them to sell the assets (software) of their technology startup.
Breach of Asset Purchase Agreement
Acquisitions can go poorly in some circumstances where they may be a potential breach of contract by one of the parties. An example would be a party not being truthful during due diligence or not delivering on a term in the contract they promised to. Any breach of contract will require a review of the asset purchase agreement and an analysis as to whether any of the terms were breached, which may lead to a business dispute.
Examples of when you may need to review an asset purchase agreement for a potential breach of contract include:
- Payment & Closing Issues. The buyer may fail to live up to the payment and closing terms within the agreement, leaving the seller owed money. The first step may include sending a demand letter to address the payment issue.
- Inventory Breach. A seller may claim to have more inventory that what actually exists and a buyer may need to address it if it is a substantial amount of money.
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How Much Does it Cost to Draft an Asset Purchase Agreement?
Drafting an asset purchase agreement comes with costs, since it requires the time of a trained lawyer to complete the project.
ContractsCounsel’s marketplace data shows the average asset purchase agreement drafting costs to be $1330.00 across all states and industries.
How Much Does it Cost to Review an Existing Asset Purchase Agreement?
Hiring a lawyer to review an asset purchase agreement will come with fees. The lawyer will take time reading over the agreement to analyze the terms and consulting with the seller.
ContractsCounsel’s marketplace data shows the average asset purchase agreement review costs to be $740.00 across all states and industries.
How Do Asset Purchase Agreement Lawyers Charge?
M&A lawyers charge for services in a variety of ways. Depending on the complexity of the agreement or deal, the lawyer will typically suggest fee options to the client.
Hourly Rates for Asset Purchase Agreements
Many business lawyers prefer to bill hourly for their time. This means the attorney will provide an hourly fee to be approved by the client and log time in a timesheet to be invoiced at the end of the project for time spent drafting or reviewing the APA. This is typically the safest way for the lawyer to charge clients since they are covered if the assignment takes more time than expected.
ContractsCounsel’s marketplace data shows the average hourly rate for a business lawyer ranges from $250 - $400 per hour.
Flat Fees for Asset Purchase Agreements
For drafting projects, flat fee billing structures have become popular. Lawyers will provide a flat-fee to the client for approval before starting the project. The benefit of flat fee billing is it provides certainty to the client on the total cost of the project. Always make sure you know what is included in the fee before starting, as it may not include rounds of revisions.
ContractsCounsel’s marketplace data shows the average flat fee rate for asset purchase agreement costs to be $1090.00.
Get Help with an Asset Purchase Agreement
Do you need help with an acquisition project? If so, post a project in ContractsCounsel’s marketplace to receive flat fee bids from business lawyers to handle your project. All lawyers on the ContractsCounsel’s platform are vetted by our team to make sure you are provided with top tier service.
