Exceptions to the general rule against successor liability include express assumption, de facto merger, mere continuation, and fraudulent transfer. Product line and continuity of enterprise theories extend liability further in some states.
Environmental and employment liabilities frequently transfer by statute.
Alternative Names:
M&A Successor Liability|Acquirer Liability
Why it Matters?
Structuring as an asset purchase does not defeat these doctrines, and the product line exception in particular imposes liability on an acquirer that continued making the same products regardless of how the deal was papered. Diligence into the target's product history, environmental sites, and employment obligations is what quantifies the exposure the structure will not avoid. Insurance and indemnity from the seller become the practical protection.
Frequently Confused with
Related terms
Frequently asked questions
Does an asset purchase avoid successor liability?
What is the practical protection?
