Asset deal vs. share deal – differences and advantages

Asset deal and share deal: definition and characteristics

An asset deal or share deal determines the structure of a company transfer. These are therefore two different forms of company acquisition. The basis for the definition is the respective object of purchase.

In a share deal, all rights and obligations of the former owner are transferred to the purchaser, who now becomes a shareholder. Depending on the type of business, the object of purchase in a share deal can be shares in a limited liability company (GmbH), shares in a stock corporation (Aktiengesellschaft), or shares in a partnership (Personengesellschaft). The sale is usually carried out by the shareholders.

An asset deal describes the acquisition of individual assets and liabilities. The scope can be determined as desired. This means that certain items, divisions, or a location of the company can be taken over. The sale of the economic goods is carried out via the company.

Differences between asset deals and share deals

The differences between asset deals and share deals can be summarized as follows:

Transfer of liabilities and assets: In an asset deal, specific liabilities and assets are transferred. A share deal involves the transfer of all company shares.

Required approvals and consents: Depending on the type of transaction, various approvals and consents may be required. These could include regulatory authorities, shareholders, or creditors.

Handling of employment contracts:

In an asset deal, the employees’ employment contracts are transferred or renegotiated. In a share deal, the employment relationships generally remain unchanged.

Treatment of hidden reserves:

In a share deal, hidden reserves may remain. In an asset deal, disclosure is possible.

Carrying amount of the transferred assets:

If an asset deal takes place, the book value of the assets may change. In a share deal, it usually remains unchanged.

Asset deal or share deal?

Both asset deals and share deals have certain advantages and disadvantages for buyers and sellers. In order to make the right decision, all advantages and disadvantages must be thoroughly weighed up. Comprehensive due diligence, in which all legal, economic, business, and tax circumstances of a company are analyzed and examined, reveals potential opportunities and risks.

Asset deal: advantages and disadvantages

It is advantageous for the buyer to select specific assets and liabilities for acquisition. This allows them to avoid undesirable parts of the business, including encumbered assets, as well as certain risks associated with the company being acquired. This limits liability risk and facilitates the integration of the acquired parts of the company.

However, it is very important to ensure that every asset to be transferred is documented. If assets are forgotten, the seller will often demand additional and excessive compensation. One of the biggest disadvantages of an asset deal is the contractual relationships between the seller and third parties, such as suppliers or customers. These parties must agree to the transfer, which may mean that the existing terms and conditions could be improved.

Share deal: advantages and disadvantages

The share deal is usually the more attractive option from a tax perspective. In the context of business succession, many obligations can be transferred in an uncomplicated manner. This often makes the transfer of liability more favorable for the seller. However, the buyer may attempt to limit liability through so-called warranty clauses. In principle, the share deal involves less effort.

Do you need help choosing the transaction type?

Whether a share deal or asset deal is more suitable depends largely on the initial business situation. Tax aspects must also be considered. The choice should always be based on comprehensive due diligence. In any case, professional expertise is advisable. Take advantage of our know-how and many years of experience in this field. We will be happy to help you successfully complete the transaction.