How are employee bonuses typically treated in an asset purchase?

by a searcher

2 years ago

I'm close to wrapping up my first asset purchase of a business and the issue of employee bonuses came up. Since the business is transitioning mid-year, how are employee bonuses typically handled? Is this typically prorated in part to Seller or is the whole bonus obligation on me as the buyer?

This isn't a big line item that I'm worried about but I'd appreciate hearing from others more experienced in the matter. Thank you!

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12 comments

investor from The University of Michigan - Stephen M. Ross School of Business

I would accrue them into the Net Working Capital at Close for purposes of the adjustment.

2 years ago | like reply | 0 likes

investor from Northwestern University - Kellogg School of Management

One thing to watch out for is the seller trying to claim that the bonuses are discretionary. If they have been paid out consistently for a period of time I think you have a great argument that those are tied into employee compensation.

2 years ago | like reply | 0 likes

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