Asset sale and Share sale
Updated: Feb 1, 2020
If you are thinking about selling your company, then one of your considerations will be which structure to use to complete the deal. The two main possibilities are:
A Share sale, where you sell the shares of your company. In this type of transaction, all its assets, liabilities and obligations are acquired, even those that the acquirer may not be aware of at the time of completion. The Buyer will acquire a company owning a business and running it as a going concern, with the contracts in place and continuing under new ownership. A share purchase will generally have greater tax advantages for you than for the Acquirer.
An Asset sale, where the acquirer buy’s the assets from your company. In this type of transaction, only the assets which the buyer agrees to obtain are acquired. Contracts or existing trading arrangements will not automatically transfer to the buyer, and these will need to be assigned to the new owner. An asset purchase will often be more tax efficient for an Acquirer than for you. You will also then have to decide what to do with what remain as the Acquirer will have the opportunity to decide which parts of your Company they want to buy.
In some cases, there can be a part asset and part share sale. I once acted for an engineering company where an Arab acquirer did not require the assets except for the goodwill of the company. My client sold the assets separately and then sold the shares in the company to the Acquirers.
Ultimately the choice of share or asset sale will be influenced by legal, financial and personal considerations.
If you would like more information we have prepared a Seller's Guide to help you, the Seller, understand the process of selling your business, what it takes and what is required at each stage.
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