What is the primary difference between a stock purchase and an asset purchase?

In the context of mergers and acquisitions, the distinction between a stock purchase and an asset purchase is crucial. When a buyer engages in an asset purchase, they have the opportunity to selectively acquire specific assets of a company, such as equipment, inventory, or intellectual property, along with any related liabilities. This targeted approach allows the buyer to take on only the risks and rewards associated with the chosen assets, potentially leaving undesirable liabilities behind.

In contrast, a stock purchase involves acquiring shares of the company, which means the buyer takes ownership of the company as a whole, including all assets and liabilities. This can lead to inheriting both valuable and problematic elements of the business. As such, the flexibility and strategic advantages of buying specific assets—as opposed to purchasing stock and assuming all associated liabilities—are primarily why option B correctly identifies the fundamental difference between these two types of transactions.