You have a beard trimming business that specializes in former ZZ Top members and "reform" Amish. There’s another beard trimming business around the corner close to going broke. They need money. FAST. You don’t want the business itself, but you do want 10 of their superior trimming gadgets, and perhaps a couple of their ultimate luxury massage chairs.
In this instance, you’re using a simple form of an asset acquisition strategy. You’re buying assets, but not stock or ownership in the company itself. The bigger reason you really care about this being an ASSET acquisition of things INSIDE the company rather than the entire corporation? Liability. You have no idea if in the past they’ve poked Amish people, ZZ Tops and other hirsute folk who are all getting together a giant class action suit against you.
If you only buy their trimmers and...well, assets…then the corporate liability doesn’t attach to you. It remains with the owners who continue to own; all you’ve bought there the products inside of it. Much safer way to travel if you have pockets that are deep.
Related or Semi-related Video
Finance: What is Contingent Liability?4 Views
Finance allah shmoop what is contingent liability All right you
know what a liability is right It's a debt it's
a promise you've made that you need to fulfill teo
pay someone and fulfilling it can be done with cash
or ah promise of delivering inventory or after you've sold
the home to the joneses An interesting family with oddly
large foreheads you know delivering good title to the home
to them right So you're fulfilling liability of producing your
home so what's a contingent liability Well think of it
is a call option or a put option on a
security A contingent liability is a derivative of some other
underlying being like another liability Well the most common contingent
liability would be a filed lawsuit that is more than
just an ambulance chasing securities lawyer hoping to get a
quick five hundred grand to go away google might be
willing to pay three billion dollars toe by ring That
wireless doorbell company started by some weirdo contingent upon ring
properly defending its lawsuit from honeywell which claims that they
own the patents on the process while the financial outcome
of that lawsuit is a contingent liability to the company
Ring and the outcome of the joneses moving into town
well is a worldwide dominance and the enslavement of all
human I mean that's what's at stake their people But 00:01:31.39 --> [endTime] not least they keep their front lawn looking nice
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