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Also known as lump-sum purchases, basket purchases are acquisitions that involve a collection of assets, rather than the purchase of a single asset. This approach often results in the ability to acquire several assets for a lower price than would be possible by purchasing them separately. With a basket purchase, the cost of each asset in the group is normally allocated based on current fair market values, and the application of a discount as part of the incentive to make the lump-sum purchase. Use of the basket purchase strategy is common in a number of business transactions, with the idea used by retailers, service providers, realtors, wholesalers, and just about any type of sales situation.
As an example, a basket purchase for a business may involve several different assets that must be acquired in order to fully acquire everything needed to remain in operation. The deal may call for buying the property where the business is located, along with a storage warehouse located on a separate piece of real estate. At the same time, the equipment used to produce the goods must also be purchased. The prospective owner may also wish to purchase the raw materials used in the production, especially if the idea is to continue the operation of the facility throughout the acquisition process.
Rather than purchasing each of these assets separately, the owner provides the buyer with a lump sum or basket purchase price to acquire all the necessary assets in one simple transaction, rather than initiate a series of transactions. In return for purchasing all the assets as part of one deal, the owner also extends a slight discount off the market value of each asset included in the purchase. This allows the buyer to save a considerable amount of money while still acquiring everything needed to continue the operation.
The idea of a basket purchase can be applied in any number of different settings. Individuals who are selling household items such as furniture may offer prospective buyers discounts if they commit to purchasing a dining room suite along with the living room suite. In like manner, businesses that offer various types of communication services may employ what is known as bundling, which is simply a basket purchase of two or more services in order to obtain an overall lower price for those services. In every application where a basket purchase is made, the seller has the benefit of moving products with less transactions involved, and the buyer has the advantage of obtaining desirable products for a price that is lower than purchasing those same products individually.
So how is the gain realized by the buyer?