Private Equity Secrets: Don’t Buy A Company’s Stock, Just Buy Its Assets

LEARN THE CAPITAL RAISING STRATEGIES AND FRAMEWORKS used by alternative asset professionals: https://go.fundraisecapital.co/apply

DOWNLOAD: A decision matrix on Stock versus Asset Purchases at https://go.fundraisecapital.co/stock-vs-asset

Stop buying companies like a gambler and start engineering your private equity deals for maximum protection and predictable outcomes. 

In this masterclass on deal structuring, host Ryan Miller breaks down the critical differences between a Stock Purchase vs. Asset Purchase and why your choice of acquisition structure is the single most important decision in your fund management strategy for 2026. 

We dive deep into the mechanics of asset carve outs, the legal reality of successor liability, and how to use intentional deal design to isolate risk while preserving operational continuity. Learn from real-world case studies like Facebook’s acquisition of Instagram, Bank of America’s Countrywide catastrophe, and the PayPal-eBay split to see how the world's best investors navigate due diligence and risk management.

If you want to master alternative asset management, learn how to raise capital, and build a high-performance investment machine that survives the future you can’t see, this episode of Making Billions is your definitive guide to professional dealmaking in the new era of private markets.

Subscribe on YouTube:
https://www.youtube.com/channel/UCTOe79EXLDsROQ0z3YLnu1QQ

Connect with Ryan Miller:
Linkedin: https://www.linkedin.com/in/rcmiller1/
Instagram: https://www.instagram.com/makingbillionspodcast/
X: https://x.com/_MakingBillions
Website: https://making-billions.com/

[THE HOST]: Ryan Miller is a recovering CFO turned angel investor in technology and energy.

Transcript

Ryan Miller
Most acquisition failures don't happen because the business is bad. They happen because the structure is wrong. And you're not just buying today's balance sheet, you're buying yesterday's decisions. And the most important upgrade a private equity buyer can make is learning when to buy the whole company and when there is a cleaner way to get exactly what they want without inheriting everything that came before that, and that's today's lesson.

Ryan Miller
And this isn't an attack on stock purchases, they're not naive, they're not outdated, and they're not unsophisticated. In fact, some of the greatest acquisitions in history were full company acquisitions. This lesson is not about ideology. It's about judgment, because as buyers gain experience, something changes. They stop asking, how do I buy this company? And they start asking, what am I actually trying to own? See, stock purchases dominate private equity for a reason. They preserve continuity and just a reminder, this content is just for informational purposes only, so just make sure you always consult with a qualified advisor before making any investment decision, especially off information that you hear here. So let's dive in.

Ryan Miller 
So when you buy a stock, the legal entity survives. Contracts remain in force, licenses remain valid, employees remain employed, and customers experience stability when continuity is the value driver, this structure is absolutely elegant. I'll give you an example. So Facebook's acquisition of Instagram is a clear example. Instagram scaled because Facebook did not disrupt the organism, the culture, the contracts, the brand and the momentum, they all stayed intact. A stock purchase is a statement, it says I believe in the whole organism. So you're saying the systems, the culture, the history and the operating rhythm together are what create the value that I want to buy but there is a trade off.

Ryan Miller 
The same continuity that preserves value also preserves everything you didn't design. So you also inherit systems you didn't build, decisions you didn't make, and risks that you did not choose. So what this means is that stock purchases are powerful when history helps you, and they are dangerous when history follows you. This is where deals quietly die or worse. So when you buy a stock, you inherit everything, not just assets and revenue, but how the revenue was recognized, how compliance was interpreted, how regulators were handled, how problems were deferred, and how culture behaved under pressure. It's not fraud, it's not a scandal. It's just history, and history does not reset at closing. So you're not just buying today's balance sheet, you're also buying yesterday's decision when you buy a company.

Ryan Miller
See, Bank of America's acquisition of Countrywide is a stark example. Many lawsuits and investigations had not yet surfaced at closing, so Bank of America didn't mismanage Countrywide. They inherited its legal past. Now this was not a diligence failure, it was a structured decision, and the trade off is simple stock purchases, trade operational continuity for full inheritance of known and unknown liabilities. So what that means to a fund manager or anyone in private equity is you can't price what you cannot see, and some risks do not even exist yet. And the most dangerous liabilities and acquisitions are not the ones disclosed in diligence, they're the ones that haven't even surfaced yet. See litigation not yet filed, regulatory investigations, not yet announced, employment claims not even surfaced yet. What about environmental pressure not even tested yet, in tax positions that aren't even challenged. Seeing a stock purchase all of those, they come with you and because the legal entity survives and now you own that you are now the defendant in something that you did not even create. See, reps and indemnities help, but they do not eliminate the tail risk.

Ryan Miller 
See, you can't diligence the future, but you can refuse to buy it. And this is where asset purchases or carve outs enter the picture, not as rebellion, but as refinement. See, in an asset purchase, you buy assets, not the legal entity. The seller remains the defendant. Pre closing liabilities generally stay behind and this is not clever lawyering, this is risk management by design. See General Motors bankruptcy is a clean example of old GM retained massive product liability exposure and new GM acquired its assets, not its stock, and that is key. This was about tail risk isolation, not just leverage. And the trade off is that asset deals reduce unknown liability risk, but they do introduce execution friction. So there's a trade off here. See when that happens contracts must be reassigned, customers must be reassured, and employees must be transitioned. So what this means is that asset deals don't remove risk, they just move it from the past into the present, where it could be better managed and asset carve outs are a specific form of asset purchases.

Ryan Miller 
See, in that case, you extract a business unit, product line, division, customer portfolio or IP plus revenue, and you stand it up independently. So asset carve outs aren't more sophisticated, but they are more intentional, and I'll give you an example. So PayPal separation from eBay is a perfect example. So in that the business didn't change, but the environment did. Separation unlocked focus, capital allocation and valuation. So a carve out is also a statement, it says, I believe in the organ over the organism. So you're saying this part works, but it works better without the rest of the body attached. So the trade off here is that carve outs concentrate risk into execution, and sometimes they stand up costs, talent can fly away in short term margins can get a little compressed. So you got to watch out for that when you're planning. And so really, what that means is carve outs don't eliminate risk, but they make it visible and selectable. And that is where the beauty of asset carve outs start to show up instead of full stock purchases. Imagine that you can just buy what you value in a company, rather the entire company. So you can just buy assets and call that your acquisition.

Ryan Miller 
Hey, thanks for listening to Making Billions, if you liked this episode, could you do me a huge favor and go leave a review? This helps us to get the podcast to more ears, to help people raise capital, learn fund management strategies, and serve our mission to help fund managers and deal syndicators to gain greater hope and focus as they build their empire. All right, let's get back to the show.

Ryan Miller
So corporations, they often miss price carve outs because costs are allocated, incentives are misaligned. Capital allocation is political and non core assets lose internal champions. An example of that is IBM spin off of Kyndryl that illustrates this point. See, infrastructure services were buried and misunderstood inside of IBM. Separation revealed the true economics of the product lines. And the trade off here is that you gain clarity and focus, but you also must rebuild that structure or put it into another company structure by yourself. So what that also means is private equity, it doesn't just create value through leverage, it creates value through separation and focus. Asset deals, they're not magic, but courts can impose successor liability if separation is purely cosmetic. So don't play games. Keep it real.

Ryan Miller 
See, when operations are unchanged or creditors were intentionally avoided, this can get you in a lot of trouble when you're doing an asset carve out deal. See, real carve outs require operational separation, governance, independence and economic substance. See, structure is not a disguise. It is in the engineering, though, and there are still times when stock purchases are the right answer. So when licenses can't transfer, or when regulatory approvals would reset, maybe it's when culture is the asset, or when speed matters, or what about when customers demand continuity? And I'll give you an example, see Disney's acquisition of Pixar, it proves this point. Pixar is culture was the asset, and Disney preserved it intentionally.

Ryan Miller
Now the trade off here is continuity protects value, but it does limit your ability to hit the reset button. And what that means is the best buyers, they're not ideological, they are situationally correct and here's the real distinction. Basic strategy is buying companies, relying on diligence and using reps and indemnities. The trade off is lower complexity and a higher tail risk. Now the pro move here is identifying the economic engine, deciding whether the history will help you or hurt you, and choosing structure accordingly. But the trade off here is higher upfront complexity, but you do receive lower tail risk. And remember, sophistication, it's not eliminating trade offs, it's choosing the ones that you can reasonably survive.

Ryan Miller 
See, every serious buyer eventually asks one question, what could hurt me five years from now that I cannot control today and then they structure backwards from that answer. Not emotionally, not ideologically, mechanically. See, there is no structure that gives you zero risk, zero friction, zero complexity and maximum upside. If there was, I'd be all over it, and I'm sure everyone listening to this would be too, every structure just moves risk around. See, the job of professional buyer is not to avoid trade offs, it's to choose the ones that they're built to manage. See, bad deals die from ignored trade offs. Good deals survive because of trade offs were chosen deliberately, and that's also true in private equity in general. It's not about owning more, it's about owning exactly what you want and doing it with your eyes wide open. And sometimes that's the whole company, but sometimes it's a cleaner extraction that gets you the same economics without inheriting unnecessary history. And great buyers don't fall in love with structures, they fall in love with outcomes and then choose the cleanest path to get there, and that's my challenge to you.

Ryan Miller
So if you want a copy of a decision matrix on stock versus asset purchases on that illustration, you can check the link in the bio and remember when doing deals earn the trust operators integrity, and you too will be well on your way in your pursuit of Making Billions.

Ryan Miller 
Wow, what a show, I hope you enjoyed this episode as much as I did. Now, if you haven't done so already, be sure to leave a comment and review on new ideas and guests you want me to bring on for future episodes. Plus, why don't you head over to YouTube and see extra takes while you get to know our guests even better, and make sure to come back for our next episode, where we dive even deeper into the people, the process and the perspectives of both investors and founders. Until then, my friends, stay hungry, focus on your goals and keep grinding towards your dream of Making Billions.