Which type of deal structure is typically less risky for acquisitions in volatile markets?

An asset purchase is typically considered less risky for acquisitions in volatile markets for several reasons. In an asset purchase, the acquiring company purchases specific assets of the target company rather than the company itself. This structure allows the buyer to select which assets and liabilities they want to assume, providing them with greater control and flexibility.

Firstly, by focusing on specific assets, the buyer can avoid taking on any unwanted liabilities that may come with acquiring the whole company, which can be particularly significant in uncertain or unstable markets. This is crucial in volatile markets where there may be hidden risks or downturns that could affect the entire business beyond just the assets being purchased.

Secondly, an asset purchase can allow for a more calculated valuation of the target company. The buyer can conduct thorough due diligence on the specific assets they intend to acquire, ensuring they are paying a fair price based on the current market conditions and the potential future performance of those assets.

Additionally, in times of market volatility, the long-term viability of the overall business can be questionable, making it advantageous for acquirers to cherry-pick valuable assets that have a robust outlook while avoiding liabilities that could pose significant risks in a tumultuous environment.

Choosing asset purchases also facilitates a smoother transition, as the buyer can integrate