An asset deal and a company takeover differ fundamentally in what is transferred. In an asset deal, you buy specific company assets and liabilities, while in a business acquisition (share deal) you buy shares and become the owner of the entire company including all assets and liabilities. Choosing between the two structures has important liability, tax and risk management implications in M&A transactions.
What exactly is an asset deal in a business acquisition?
An asset deal involves taking over specific assets and liabilities rather than the entire business. The buyer selects which assets and liabilities are taken over, giving control over what is and is not included in the transaction.
In an asset deal, the following are typically transferred: tangible assets such as machinery and inventory, intangible assets such as brands and customer bases, contracts that are explicitly transferred, and specifically named liabilities. The selling entity continues to exist as a legal entity.
The main distinction from other acquisition methods lies in the selectivity. Whereas in a share deal everything transfers automatically, in an asset deal you determine exactly what is taken over. This protects against unknown liabilities, but requires explicit transfer of every contract and licence.
Special rules apply to employment contracts. When there is a transfer of undertaking under Article 7:662 of the Civil Code, employment contracts are automatically transferred. This happens when an economic entity is transferred while retaining its identity, assessed on the basis of criteria such as acquisition of staff, customer base and business assets.
How does a share deal work and what are its key features?
A share deal means that you buy shares in the target company and thus become the owner of the entire company. All assets, liabilities, contracts and obligations pass automatically as the legal entity itself changes hands.
The legal structure remains intact in a share deal. Contracts, permits and insurance continue without renewed approval. Here, the BV structure offers significant advantages through flexible share capital structures, allowing different classes of shares with different voting and profit rights.
Financially, a share deal means taking over the entire balance sheet. This includes not only the visible assets and liabilities, but also potential hidden liabilities such as warranty claims, tax assessments or legal proceedings. The buyer literally steps into the shoes of the previous owner.
A key advantage is operational continuity. Customer relationships, supplier contracts and personnel agreements remain unchanged. This prevents disruption of business processes and preserves the value of relationships and contracts that are essential to business operations.
What are the main differences between asset deal and share deal?
The differences between the two deal structures determine what risks, costs and complexity you accept. Asset deals offer more control but require more administration, while share deals are simpler but carry more risk.
Liability constitutes the biggest difference. In asset deals, you are only liable for explicitly assumed liabilities. In share deals, you inherit all existing and future claims arising from the company's past, including unknown risks.
Contract transfer proceeds differently. Asset deals require explicit transfer of each contract, which may require approval of contracting parties. Share deals automatically retain all contracts because the contracting party (the legal entity) remains unchanged.
The complexity varies considerably. Asset deals require detailed inventory of assets and liabilities to be taken over, individual transfer acts and possibly renewed licence applications. Share deals are administratively simpler as only share transfers take place.
Due diligence has a different focus in both structures. Asset deals concentrate on the value and condition of specific assets. Share deals require comprehensive analysis of all aspects of the business, including historical liabilities and potential risks.
When do you choose an asset deal versus a business acquisition?
The choice depends on risk tolerance, tax optimisation and operational considerations. Asset deals are appropriate when you want to be selective and mitigate risk, while share deals are preferred for continuity and simplicity.
Opt for an asset deal when the target company may have significant unknown liabilities, such as legal proceedings or environmental contamination. An asset deal also offers advantages in companies with complex ownership structures or when you only want to acquire specific business units.
A share deal is preferable for companies with valuable contracts that are difficult to transfer, such as exclusive distribution agreements or important customer contracts. Also, when operational continuity is crucial and disruptions are costly, a share deal is more practical.
Tax optimisation plays an important role. Share deals can benefit from the participation exemption for interests of five per cent or more. Asset deals can benefit depreciation opportunities on acquired assets, but may have VAT implications.
The size and complexity of the transaction influence the choice. Smaller, less complex companies lend themselves better to asset deals. Larger companies with extensive contract portfolios and operational interdependencies are often better suited to share deals because of practicality.
What legal and tax issues should you consider in both deal structures?
Both deal structures have different legal and tax implications that determine the overall costs and risks of the transaction. Correct structuring prevents unexpected tax assessments and legal complications.
VAT treatment differs fundamentally. Asset deals may be subject to VAT for the transfer of business assets, unless there is a transfer of general property. Share deals are VAT-exempt because shares are not subject to VAT.
Transfer tax (RETT) plays a role mainly in property-intensive transactions. Asset deals involving transfer of property are subject to transfer tax of 10.4% for investment properties. Share deals can avoid RETT, but anti-abuse provisions apply to real estate partnerships.
Due diligence requirements differ by structure. Asset deals focus on specific assets and their legal status. Share deals require comprehensive analysis of all aspects, including tax positions, legal proceedings and compliance history.
Warranties and indemnities have different scope. Asset deals limit warranties to acquired elements. Share deals require comprehensive warranties for all aspects of the business, which means higher costs for legal documentation.
Notarial fees and registration fees vary. Asset deals may have higher costs due to individual transfer acts for different assets. Share deals have lower notarial costs but may have higher due diligence costs.
How does the choice between asset deal and share deal affect valuation?
The deal structure has a direct impact on the final purchase price and negotiating position. Different deal structures create different value propositions for buyer and seller, which affects the financial outcome of the takeover determines.
Asset deals often lead to lower valuations because buyers charge a risk premium for complexity and uncertainties. However, the ability to selectively acquire assets can be valuable when certain business units are not wanted.
Share deals typically reflect full enterprise value as all elements are acquired. However, the valuation should be adjusted for identified risks and liabilities that emerge during due diligence.
Tax breaks affect net proceeds for sellers. Share deals can benefit from the participation exemption, allowing the sale proceeds to be tax-free. Asset deals can lead to taxable gains on company assets.
Transaction costs vary significantly between the two structures. Asset deals have higher legal and administrative costs due to the complexity of individual transfers. Share deals have lower direct costs but may require higher due diligence expenditure.
Bargaining dynamics differ by structure. Asset deals give buyers more bargaining power through selectivity. Share deals can be completed faster but require more extensive guarantee arrangements, which can complicate negotiations.
For a successful transaction, professional guidance is essential to choose the right structure and make the most of it. We guide entrepreneurs and investors in making these crucial choices and ensure value maximisation in each M&A process. For tailor-made advice, please contact with us.
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