Asset Vs Share Sale

When you take your company to market, you have the choice of offering it for sale in two different ways – either the sale of the shares in the business or the sale of the selected assets owned by the business.

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Which Is Better For You - An Asset Sale Or Share Sale

When you take your company to market, you have the choice of offering it for sale in two different ways – either the sale of the shares in the business or the sale of the selected assets owned by the business.

What’s right for you may often, at first glance, not be right for an acquirer and vice versa. However, an M&A advisor will dig deeper into the belief and based upon their experience that there is always a deal to be done.

The successful brokering of a deal requires an advisor’s careful and deliberate negotiating and analytical skills working on behalf of his or her client but with an eye on the interests of the acquirer.

Before we examine asset sales and share sales, what are a potential acquirer’s motivations for wanting to own your business or selected assets owned by your business?

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The Acquirer's Motivation

In nearly all cases, an acquirer buys a business (or the assets of a business) because he or she believes that there is a significant profit opportunity and because they believe they can make more money and achieve a higher market share than its current ownership. An acquirer greatly admires and respects how a business’s current ownership and management team have built the company to date. However, the acquirer is of the opinion that:

They have a specific skill set not possessed by the current management team. Their connections in and knowledge of your sector mean that they can reduce sales-related or variable costs, and/or there are significant fixed costs savings to be made by amalgamating your company or the assets your company owns into their corporate structure.

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  1. The absolute reduction of known and unknown risks as far as possible to get to as close to zero overall risk
  2. Payment of the lowest amount possible preferably stretched out over as long a time as possible
  3. From day one of their ownership of the assets or shares, there is little or no disruption in the continuation of the delivery of revenue from the acquired assets or company.

Purchasing a business (or the assets of the business) involves significant risk for an acquirer. In most cases, some or all of the money used for the initial consideration (the first payment an acquirer makes to you) is borrowed from third parties.

The repayment of any loan used to acquire the business or the assets of a business may put cashflow pressure on the acquired entity and on other companies within the acquirer’s group. In a few cases, the acquirer will have to agree to a personal guarantee on the funds they raise to purchase your business.

An asset sale is almost always the safer and cheaper option for an acquirer but this might not be in your best interest.

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pros and cons of share sales

With a share sale, the acquirer is buying the shares in and control over the incorporated business including those parts of the business which have no intrinsic separate commercial value as well as its liabilities.


 You decide how you exit – whether you want a clean break or you wish to have some involvement in the business’s future development, you choose the type of exit you want

Peace of mind – once the shares have been transferred, it’s no longer your responsibility – you can walk away for good if you please or you can help the acquirer to succeed without having to worry about the legality of the company’s actions (unless you’re still intimately involved in the decision-making process)

Tax advantages – although much less than before, you will benefit from Entrepreneurs’ Relief and, if you take a share in the acquiring company as part of the deal, you can defer or roll over some of the tax you would otherwise be liable to pay on your capital gain.

Easier to transfer customer data – unlike with an asset sale where there may be significant GDPR difficulties in handing over your customers’ personal details to your acquirer, this is perfectly legal with a share sale.

Solicitor and accountant fees – they are likely to be substantial and the cost will increase depending on the size and complexity of the business you’re selling

Possibility of a sale being blocked by other shareholders or third parties because of an inability to transfer licenses, permits, and online trading accounts, and so on that your acquirer will need to trade.

Legal uncertainty about any personal guarantees – many HP agreements will allow an acquirer to “novate” your existing contract over to them but you may be required to sign a personal guarantee even though you’re no longer in charge of the company.

Pros And Cons Of Asset Sales

With an asset sale, an acquirer purchases selected assets from your business which they believe are likely to produce future income.

You choose the assets you hold onto – you continue to own both the company and the assets you wish to exploit however your company’s cash balance will be significantly boosted by the sale of no-longer-owned assets

Much harder for minority shareholder or third parties to block a sale – unless asset sales are covered by your Articles or the shareholders’ agreement

Much quicker sales process – the due diligence period for an asset sale is considerably shorter because of the relative simplicity of the transaction in comparison to a share sale.

Stronger negotiating position – the acquirer is only purchasing the assets they have identified as being worthy of ownership meaning that there’s little or no need to discount for unwanted assets and for known and unknown liabilities.

Profit offset – if you sell assets at a loss and you can demonstrate that loss, you can use those losses to reduce corporation tax

More complex and sometimes higher tax liabilities – get advice from your accountant about potential hidden traps including balancing charges. There is also the threat of double taxation on the gains when profit is distributed to shareholders.

The company is still your responsibility – if you intend to wind the company up following the sales of the asset, this is often complicated and expensive

More preparation work – in an asset sale, the seller and their professional representatives do most of the work particularly in ensuring that effective legal transfer of all selected assets takes place. However, you can charge a premium for this on the sale price

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