The 4 types of Acquisitions (and Which One Leaves You with More Money)

When you sell your company, how the deal is structured can be just as important as the price.
The right structure protects your payout, minimizes taxes, and keeps the deal on track.
The wrong one can leave founders shortchanged or locked into unfavorable terms long after closing.

Here’s what every founder should know about mergers, stock sales, asset sales, and acquihires — and which structure tends to work best for you.

1. Mergers

What It Is

A merger combines two companies into one.
In most startup deals, the buyer forms a subsidiary (“merger sub”) that merges into your company.
Your company survives as a wholly owned subsidiary of the buyer, and your stockholders receive cash, stock, or both in exchange for their shares.

Why Buyers Like It

• Clean legal transfer. All assets, IP, and contracts move automatically.
• 100% control. The buyer ends up with complete ownership, even if a few stockholders are unresponsive.
• Simple integration. The target company can stay intact until the buyer is ready to absorb it.

Why Founders Like It

• Best balance of speed and certainty. The deal can close smoothly even with many shareholders or complex assets.
• Direct payout. You don’t have to separately distribute proceeds like in an asset sale.
• Better optics. Mergers are viewed as “true acquisitions,” which can protect your reputation and investor relationships.

Why Founders Should Be Careful

• Some contracts treat a merger as an “assignment,” requiring third-party consent.
• If the buyer pays partly in stock, there may be resale restrictions or delayed liquidity.
• State filings and paperwork take extra time compared to a small stock sale.

Founder Verdict:
✅ Best overall for most startup exits.
Mergers strike the right balance of speed, simplicity, and payout fairness. They’re preferred when your buyer wants the full company, not just the team or tech.

2. Stock Sales

What It Is

In a stock sale, the buyer purchases shares directly from your stockholders. This is what most people think of when it comes to an "exit".
Your company remains intact. Same contracts, name, and structure. But ownership changes hands.

Why Buyers Like It

• Low administrative lift. No new entities or filings.
• Continuity. Contracts, licenses, and employees stay in place without new paperwork.
• Good for small teams. Works well when there are only a few shareholders to coordinate with.

Why Buyers Avoid It

• Inherited liabilities. The buyer takes on all historical obligations, including taxes, lawsuits, and compliance risks.
• Tax disadvantage. The buyer cannot “step up” the value of assets for depreciation.
• Difficult if cap table is large. One missing or dissenting shareholder can stall the deal.

Why Founders Like It

• Simple documentation. Clean and fast if everyone agrees.
• Direct payment. Each shareholder receives their proceeds at closing.
• No major operational changes. Your company’s structure remains the same.

Why Founders Should Be Careful

• If your cap table includes many small or inactive shareholders, chasing signatures can delay or even kill the deal.
• Buyers often require strong indemnification clauses, meaning a portion of your payout might be held back in escrow.

Founder Verdict:
✅ Ideal for closely held companies with aligned investors.
⚠️ Risky for messy cap tables or many early angel investors.
If everyone is cooperative, a stock sale can be the simplest and most founder-friendly path.

3. Asset Sales

What It Is

In an asset sale, the buyer picks and chooses which assets to buy — such as IP, contracts, and customer lists — and which liabilities to assume.
Your company remains in existence after the sale and is responsible for everything left behind.

Why Buyers Like It

• Risk control. They can leave unwanted liabilities and contracts.
• Tax efficiency. Buyers receive a “step-up” in basis, which lowers their future tax burden.
• Flexibility. Perfect for buyers who only want your product, IP, or team — not the full entity.

Why Founders Usually Don’t

• Higher administrative cost. Every contract and license must be reassigned individually.
• Third-party consents. Customers or partners often need to approve each transfer.
• Double taxation. If your company is a C-corp, profits from the sale are taxed twice — once at the company level and again when distributed to shareholders.
• Clean-up required. You’ll still have to dissolve your company afterward.

Founder Verdict:
⚠️ Rarely the best option unless leverage is low or assets are being sold piecemeal.
Buyers love asset sales because they minimize their risk, but founders usually walk away with less. If a buyer insists on this structure, negotiate a higher price to offset the tax and admin costs.

4. Acquihires

What It Is

An acquihire is an acquisition driven primarily by your team, not your technology or revenue.
The buyer wants the people, not the product - and most of the deal value goes toward employee retention packages, not investor payouts.

Why Buyers Like It

• Access to specialized talent. It’s a faster, more efficient hiring strategy.
• Lower risk. The buyer avoids taking on old liabilities or overhead.
• Strategic optics. Looks like an acquisition, even when it’s primarily a hiring move.
• Bypass anti-trust. In big tech, anti-trust laws can slow acquisitions to a halt. By grabbing just the talent, and not the company, buyers can get around this.

Why Founders Sometimes Accept It

• If funding has dried up, an acquihire can preserve their jobs and reputation.
• Founders may receive retention bonuses or new employment contracts with upside.
• It can provide a graceful exit instead of a shutdown.

Why Founders Should Be Cautious

• Investors often get little or nothing. Most of the “purchase price” is tied to employee compensation.
• Proceeds are usually taxed as income. Unlike capital gains, these payments can’t benefit from lower tax rates.
• Control is lost quickly. Once your team joins the buyer, your company is typically wound down within weeks, and then sold for parts.
• Perception risk. Acquihires are not viewed as “wins” by all investors - communication matters.
• Employees can get the shaft. Employees who are not taken as a part of the acquihire are left in the lurch, working for a dead company.

The Windsurf Example

Google’s acquisition of the Windsurf executive team for 2.4 billion dollars was structured as a classic acquihire. The company wasn’t buying technology; it was hiring talent (enabling them to bypass anti-trust laws, which would have slowed a normal acquisition.
The public reaction highlighted a growing truth in tech: buyers now treat skilled teams as the asset.
For founders, that means the negotiation isn’t just about valuation - it’s about who gets credit, who gets paid, and what happens next.

Founder Verdict:
⚠️ Best as a soft landing, not a wealth event (usually).
When all else fails, acquihires can be the way to go. But you won't be capturing any enterprise value, and your investors and employees will not be happy with your golden parachute.

5. Which Structure Works Best for Founders?

6. How Founders Should Approach Deal Structure Strategically

1. Understand the buyer’s motivation. If they want your team, that’s an acquihire. If they want your product or market position, you have leverage to push for a merger.
2. Negotiate structure early. Don’t wait for definitive agreements — clarify the intended structure at the term sheet stage.
3. Model tax impact. Run after-tax projections for each structure. The “same” purchase price can lead to drastically different payouts.
4. Review your contracts. Change-of-control or anti-assignment clauses may limit what structures are feasible.
5. Communicate clearly with investors. Explain why a particular structure maximizes total recovery or long-term upside.
6. Leverage structure as a bargaining chip. If a buyer insists on a founder-unfriendly structure, you can often trade that concession for higher compensation or retention bonuses.

7. The Bottom Line

Every buyer has a reason for choosing a particular deal structure.
Your job as a founder is to understand those incentives — and use them to protect your outcome.

A merger usually gives founders the cleanest path to value.
A stock sale works beautifully when ownership is simple.
An asset sale benefits the buyer far more than you.
An acquihire preserves the team but rarely creates wealth.

The structure isn’t just paperwork - it’s strategy.

At Apex Corporate Law, we help founders negotiate exits that are clean, defensible, and aligned with their goals — whether it’s maximizing proceeds, preserving their team, or setting up their next venture for success.