Legal Definitions - affiliated purchaser

An affiliated purchaser is a buyer who has a close relationship with the seller or another party involved in a transaction, such that they are not considered independent. This relationship often involves control, common ownership, or significant influence. Laws and regulations frequently scrutinize transactions involving affiliated purchasers more closely to ensure fairness, prevent conflicts of interest, and confirm that the terms are comparable to what would be agreed upon by unrelated parties negotiating freely.

Here are some examples to illustrate this concept:

• Corporate Restructuring: Imagine "MegaCorp Inc." owns a subsidiary called "Logistics Solutions LLC." MegaCorp decides to divest one of its older warehouse facilities. Instead of selling it to an external, independent buyer, Logistics Solutions LLC purchases the warehouse from its parent company, MegaCorp Inc., to expand its own operations.

  Explanation: Logistics Solutions LLC is an affiliated purchaser because it is a subsidiary directly controlled by MegaCorp Inc., the seller. They are not independent entities negotiating at arm's length, as their actions are ultimately directed by the same corporate umbrella.

• Real Estate Development: "Green Acres Development" is a company that acquires large plots of land for residential projects. The principal owner of Green Acres Development also owns a separate construction firm, "BuildFast Homes Inc." When Green Acres Development secures a new parcel, it then "sells" a portion of that land to BuildFast Homes Inc. for the purpose of constructing houses.

  Explanation: BuildFast Homes Inc. is an affiliated purchaser because it shares common ownership and control with Green Acres Development, the seller. The transaction occurs between two entities that are ultimately managed by the same individual or group, rather than between two unrelated market participants.

• Securities Transactions: A publicly traded company, "FutureTech Innovations," wants to buy back a significant number of its own shares from the market to boost shareholder value. Instead of purchasing shares directly on the open market, FutureTech Innovations arranges to buy a large block of shares from its own pension fund, which is managed by a board largely composed of FutureTech Innovations' senior executives.

  Explanation: The company's pension fund acts as an affiliated purchaser because, despite being a legally separate entity, it is closely tied to and significantly influenced by FutureTech Innovations itself, which is the seller in this context. The transaction is not between two completely independent parties with separate interests.