Chapter 10

Asset deal, share deal and what sits between

Structure is the first commercial decision in a transaction and the one most often taken last. It changes the tax outcome, the risk that transfers and the work involved in completing.

Asset transaction

Selected assets change hands: the domain, the stock, the customer database, the contracts that can be assigned. The legal entity stays with the seller, along with its history and most of its liabilities.

Buyers tend to prefer this. It is cleaner, and unknown obligations from the past stay where they were. The complication is practical: every contract, licence and account has to be transferred individually, and some counterparties will use the moment to renegotiate.

Share transaction

The entity itself is sold. Contracts, permits and registrations usually remain in place because the counterparty has not changed, which makes completion far simpler.

The trade-off is that the history transfers too. Buyers respond with wider warranties, longer liability periods and, frequently, a portion of the consideration held back or placed with a third party.

In between

• Staged acquisition. A first portion now, the rest on agreed dates or results.
• Management buy-in or buy-out. An incoming manager or the existing team takes over, often with seller financing.
• Carve-out. One brand or one webshop is separated from a larger group before sale.
• Asset deal with a service agreement. The seller continues to run parts of the operation for a defined period.

Choosing

The decision usually turns on three questions: how much of the value sits in transferable contracts, how much unknown history the entity carries, and what the tax position of the seller allows.

Because the tax outcome differs per country and per shareholding structure, the structure is one of the few points where advice should be taken before a position is stated.

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