Asset deal vs. share deal – Differences and advantages
There are some special aspects to consider when selling and buying a company. One question that often comes up is the transaction structure for the acquisition of a company. Basically, this can be done through a so-called asset deal or share deal. In this article, we will look at the differences as well as the advantages and disadvantages.
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 of the definition is the relevant object of purchase.
In a share deal, all rights and obligations of the former owner are transferred to the acquirer, who now becomes the shareholder. Depending on the type of business, the object of purchase in a share deal can be GmbH shares, shares or also company shares in a partnership. The sale usually takes place via the shareholders.
An asset deal describes the acquisition of individual assets and liabilities. The scope can be determined as desired. For example, certain items, divisions, or a location of the company can be taken over. The sale of the assets takes place via the company.
Differences between asset deal and share deal
The differences between asset deal and share deal can be related to the following fields:
Transfer of liabilities and assets:
In an asset deal, liabilities and assets are specifically transferred. The share deal is accompanied by the transfer of the entire shares in the company.
Required permits and approvals:
Depending on the type of transaction, various approvals and consents may be required. Conceivable would be supervisory authorities, shareholders or creditors.
Treatment of employment contracts:
In an asset deal, the employment contracts are transferred or renegotiated. In the case of a share deal, the employment contracts generally remain unchanged.
Treatment of hidden reserves:
In a share deal, hidden reserves may remain. In the asset deal, a disclosure is possible.
Carrying amount of the transferred assets:
If an asset deal is made, the book value of the assets may change. In a share deal, it generally remains unchanged.
Asset deal or share deal?
Both asset deal and share deal have some advantages and disadvantages for buyers and sellers. In order to make the right decision, all advantages and disadvantages must be thoroughly weighed up. A comprehensive due diligence, in which all legal, economic, business and tax aspects of a company are analyzed and examined, reveals possible opportunities and risks.
It is an advantage for the purchaser to select specific assets and liabilities to take them over. Unwanted parts of the company, including encumbered assets, can thus be avoided, as can certainly risks of the company to be acquired. This limits the liability risk and facilitates the integration of the acquired parts of the company.
However, great care must be taken here to ensure that each asset to be transferred is documented. If assets are forgotten, the seller often demands additional and excessive compensation. One of the biggest disadvantages of an asset deal is the contractual relationship between the seller and third parties, such as suppliers or customers. For example, the latter must agree to the transfer, which may mean that an improvement in the existing conditions could be made.
Share deal: Advantages and disadvantages
The share deal is usually the more attractive option from a tax point of view. In the context of business succession, many obligations can be transferred in an uncomplicated manner. Thus, the transfer of liability is often more comfortable for the seller side. However, the buyer side can try to limit liability here by means of so-called guarantee clauses. In principle, the share deal involves less effort.
Asset deals and share deals offer different approaches to a company takeover. While in an asset deal the buyer takes over selected assets and liabilities, in a share deal the entire company is taken over. Both forms have their advantages and disadvantages and should be discussed and weighed against each other in each individual case. Professional support from an M&A consultant can help with the complex decision for the right transaction structure.
Whether a share deal or an asset deal is more suitable depends to a large extent on the initial business situation. Tax aspects also need to be considered. The decision should always be based on a comprehensive due diligence. In any case, professional expertise is advisable. Take advantage of our know-how and our many years of experience in the field. We will be happy to assist you in the successful execution of the transaction.