A peel agreement is a legal contract which involves the sale of a business or company where the buyer agrees to purchase only certain assets or a part of the business. It is also known as a partial sale or a partial asset sale.
The term “peel” refers to the act of peeling off a layer, and in this case, it refers to the buyer`s ability to purchase only a portion of the business, leaving the remaining assets intact.
In a peel agreement, the buyer and seller negotiate which assets will be included in the sale. The buyer typically purchases only specific assets, such as a particular brand name, patent, or technology, while the seller retains ownership of the other assets.
Peel agreements are particularly useful when a business has multiple divisions or product lines, and the seller wants to dispose of one or more of these lines. It allows the seller to sell off unwanted or underperforming assets while retaining ownership of the core business.
Peel agreements can also be used in mergers and acquisitions, where buyers may not want to purchase an entire business but only specific assets that are of interest to them.
One advantage of a peel agreement is that it offers flexibility in the negotiation process, allowing both parties to tailor the agreement to their specific needs. It is also a cost-effective way for buyers to acquire valuable assets without having to purchase an entire business. For sellers, it provides an opportunity to monetize underperforming assets and reallocate resources to more profitable parts of the business.
However, peel agreements can also be complicated and require careful negotiation and legal counsel. The terms of the agreement must be clearly defined and agreed upon by both parties to avoid any disputes or misunderstandings down the road.
In conclusion, a peel agreement is a legal contract that allows a buyer to purchase specific assets or a part of a business, leaving the remaining assets intact. It offers flexibility and cost-effectiveness in the negotiation process and can be a useful tool in disposing of underperforming assets or in mergers and acquisitions. However, it requires careful negotiation and legal counsel to ensure that both parties agree on the terms of the agreement.