The buyer is proposing an asset purchase structure but wants to include our proprietary software code and our facility's real estate in the transaction. How do we carve out these valuable assets from the operating company to protect our long-term wealth?

Question

Tyler Smith · Accepted Answer

In an asset sale, buyers often try to sweep every asset into the transaction under a broad definition of operating property. To protect your long-term wealth, you must establish clear boundaries between your core operating company and your high-value proprietary assets before signing the letter of intent.

First, use the Step by Step Exit framework to conduct a thorough Business Integrity Review. This review helps you identify assets that are not essential to the daily operations of the business. Real estate and proprietary software code should ideally be held in separate legal entities. If you own the facility, you should lease it back to the operating company under a market-rate triple-net lease. This creates a reliable, ongoing income stream post-sale and keeps the real estate asset out of the transaction.

For your proprietary software, structure a licensing agreement rather than a full transfer of ownership. Your operating company can hold an exclusive, perpetual license to use the software, while your separate holding company retains the underlying intellectual property rights. This allows the buyer to run the business seamlessly while you retain ownership of the core code.

During your weekly Level 10 Meeting™, work with your leadership team and transaction counsel to draft these carve-outs. Use your Accountability Chart to assign a clear owner to manage this intellectual property separation. By defining these assets as excluded items early in the negotiation, you preserve your underlying wealth while delivering a clean, functional operating company to the buyer.