In an asset deal, it’s right there in the name — a buyer purchases the operating assets of a business. Of course, these assets generally fall into two major categories: tangible assets and intangible assets. The specific types of assets in each category are virtually innumerable, but the more examples of tangible assets and intangible asset you have in your quiver, the more you know what to expect from an asset deal. Let’s start with examples of tangible assets and intangible asset types across both categories that paint a general picture of commonly acquired assets, from the macro to the micro.
Tangible Assets
In this case, the meaning of “tangible” is pretty much unaffected by corporate jargon; the assets that you can physically reach out and touch are tangible assets. In an M&A deal, long term asset types and current tangible assets also include those that possess a real transactional or monetary value. Tangible assets can be used as collateral to obtain loans, and the net tangible asset typically make up the majority of a company’s total assets.
Tangible assets are further broken down into subcategories, such as current assets. These types of assets have both a physical presence and a finite transactional value or monetary value. A few key current asset options are the following:
- Cash
- Cash equivalents
- Inventory
- Securities
- Accounts receivable
- Prepaid expenses
- Short-term investments
Unlike current tangible assets, long-term or fixed assets are assets that were purchased with the intent of long-term use. While a long term asset can’t generally be flipped as quickly as a current asset, a fixed asset has a concrete transactional value, too. Some examples of long-term assets or fixed assets include the following:
- Real estate properties, including land and buildings
- Manufacturing plants
- Manufacturing equipment
- Office furniture
- Tools
- Electronics and computers
- Office supplies
- Vehicles
Intangible Assets
In contrast to the tangible asset, intangible assets, sometimes referred to as intellectual property (IP), are all the types of assets that can’t be touched, or those that don’t have a concrete, physical form. The more significant intangible assets are non-physical and have a more theoretical valuation rather than a specific transactional value or price tag. These assets often inform the total value of the brand or brand identity.
Getting more specific, key intangible assets might include items such as the following:
- Any foreign or domestic patents or patent licenses
- Trademarks
- Trade names
- Service marks
- Copyrights
- Material licensing
- Franchises
- Conditional sales contracts
- Advertising contracts
- Customer or marketing lists
- Business methodologies
Intangible assets, as LexisNexis points out, may also include copies of a massive variety of agreements, documents and records. While the variety of physical and digital documents available seemingly blurs the line between tangible and intangible types of assets, documents and information such as the following are considered intangible because they don’t have a concrete transactional value:
- Lists, agreements and documentation relating to the above-listed tangible and intangible assets
- Meeting minutes, including meetings of committees, directors and shareholders
- Detailed employee data, including logs of labor issues and union activity
- Voting trust agreements
- Founders agreements
- Shareholder agreements
- Agreements relating to conversions, exchanges, redemptions and repurchases
- Registration rights agreements
- Company stock books
- Quarterly reports
- Annual reports
- Shareholder communications
- Press releases
- Convertible debt agreements
- Stock option purchase plans
- Notices of exemptions
- Credit agreements
- Supplier and customer contracts (indicating which suppliers are the sole source)
- Manufacturing contracts
- Loan agreements (including loans to officers, directors and employees)
- Insurance policy agreements covering company property or even key persons at the company
- Partnership and joint venture agreements
- Incentive agreements such as bonus, retirement, pension and deferred compensation plans
- Material licensing agreements made out to third parties
- Lists of proprietary processes
- Patent law firm contacts
- Manufacturing breakdowns, including lists of products manufactured, personnel details and suppliers
- Agreements relating to the sale and lease of capital equipment
- Copies of all market research conducted within a specific time frame preceding the asset deal
- Schedules related to environmental responsibilities
- Documentation of ongoing investigations or investigation claims from regulatory bodies
…But That’s Not All
The Business Development Bank of Canada reminds us that asset deals also come with the antithesis of assets: liabilities. Some common liabilities include accounts payable, credit debt, bank operating credit, accrued expenses, taxes owed, bank debt and other long-term debt.
Asset deals aren’t the only form of M&As, either. Not all types of M&A agreements revolve around these cut-and-dried total assets. In a stock purchase, for instance, the buyer purchases enough shares of the selling company’s stock until it owns enough of a majority to take possession of the target company. Here, the assets don’t change hands, the management does. And of course, mergers occur when two companies join together as a single legal entity. In this case, all of the types of assets we’ve covered so far don’t necessarily change hands from one existing entity to another; The net tangible asset and net intangible asset become the property of the newly formed company, from the inventory to the trademarks.
Work With CapLinked
No matter what type of asset you’re dealing with, whether it’s intangible or tangible assets, long-term or fixed asset options, the sheer breadth of asset types you’ll encounter in mergers and acquisitions can seem daunting — but that’s why CapLinked is here. Our virtual data room offers Safelink-secured digital vaults for quickly uploading and seamlessly sharing file types across a spectrum of common formats, making it ideal for asset inventory and asset management. Start a free trial to make sure you’ve accounted for every single asset under your umbrella, from desk chairs to certified patent copies.
Dan Ketchum has been an LA-based freelance writer, consultant and small business owner for over a decade. Along the way, he’s fortunate enough to have collaborated with business brands including Chron.com, Fortune, GoBankingRates.com, Office Depot, The Motley Fool, and more.
Sources
Corporate Finance Institute (CFI) – Asset Deal
LexisNexis – Identify, Verify, and Mitigate Risk with This Acquisition Due Diligence Checklist
Investopedia – Tangible Asset
BDC – Tangible and Intangible Assets
Corporate Finance Institute (CFI) – Tangible Assets
