Stock Purchase vs Asset Purchase

December 15, 2025

by a searcher from Northwestern University - Kellogg School of Management in Chicago, IL, USA

I am looking at a $2M purchase of a company and the owner wants to know if its going to be a stock or asset purchase. I know asset is in favor of the buyer and each type come with its own set of headaches. I believe he is asking me for one or the other based on the seller tax implications from the type of sale. Can anyone explain to me what the difference in Ent. value would be for the type of purchase? For example, $2M is a fair PP for a stock purchase, but maybe $2.1M would be the equivalent to an asset purchase.

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Reply by a searcher
in Washington, DC, USA

The points above on liabilities are critical but… at the risk of sounding academic, in terms of the valuation delta ($2M vs $2.1M), here is how to think of it. The difference in value is the Net Present Value (NPV) of the tax shield you get from an Asset Sale. In an Asset Deal (or a Stock Deal with a tax election), you can amortize the Purchase Price (specifically Goodwill/Intangibles) over 15 years. On a $2M deal, let's assume ~$1.6M is allocated to Goodwill. That creates an annual tax deduction of ~$106k. At a ~30% blended tax rate, that deduction saves you ~$32k/year in actual cash taxes for 15 years. The NPV of that 15-year annuity (at a 10% discount rate) is roughly $240,000. So mathematically, paying $2.1M for an Asset Deal (a $100k premium) to unlock ~$240k in value is a winning trade for you. You come out ~$140k ahead.

Reply by a professional
from University of Miami in New York, NY, USA

At that price point, it doesn't really matter. Depending on the specifics, seller likely wants stock sale because all of their assets are depreciated. With a stock sale, the seller can treat the basis allocation with mostly non-depreciable goodwill. That said, you can go along with the stock sale, and note in the PSA that it is a stock sale under 332(h)(10) of the tax code. That gets you asset sale treatment and the seller gets stock sale treatment. Win-win. Let me know if I can be of further assistance. -- Vishal S. Petigara, Esq. Managing Member Petigara Law Group, PLLC Tel: +###-###-#### Email: redacted https://calendly.com/petigara-law-group/meeting-with-vishal-petigara

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