Business Acquisition and Acquiring Assets

  • Author: Patrick 'Pat' Richards
  • Posted on: 21st August 2019
  • Posted in: Blog

"Surely, if I'm buying the company shareholding, am I not acquiring its assets?"

How often have I heard this observation as I try to explain the difference between buying the sole asset of shares and purchasing each asset of a business?

Even if the commercial effect may prove similar, the two methods are fundamentally different at Law. The Asset Sale Agreement sells the company's assets and possibly certain liabilities, which make up that enterprise whilst a Share Sale applies where a business conducted by the company is targeted.

Any negotiations should be cemented in outline heads of terms to be considered with Lawyers and Accountants so that the structure of the proposed Agreement is identified at an early stage.

There are certain instances such as Receivership, disposal of a division and where there are dissentient minority shareholders, where there is likely to be no option. Fiscally the Seller's position will prevail on its preference, but a final assessment will ultimately depend not so much on the respective negotiating strength of the parties, but rather on a full examination of the implications for each, having regard to their circumstances.

Which therefore is more tax effective?

Schemes Allowances and Reliefs should be explored; the Seller's immediate liability to potential taxes considered. The case between an individual seller and a company one becomes even more complex. A seller of shares will want cash, simplicity, speed and a clean break and possibly quiet retirement! Disruption, potential warranty claims and costs of marketing come into play.

Next Steps

Take Advice and prepare an indicative check-list. Accountants work well with Lawyers in providing an expert steer and secure documentation.

At Crosby Woods, we have several local connections who specialise in business acquisitions and we would be happy to answer any questions you may have on this subject or point you in the direction of other local firms that we work alongside to ensure your matter is handled by a team of qualified professionals. 

If you would like to discuss a business acquisition matter, then please get in touch on 01273 734 600 or email advice@crosbywoods.co.uk