An asset deal entails significant disadvantages for sellers, including double taxation, increased liability risks and complex administrative processes. The seller retains legal responsibilities for the original entity and loses tax benefits that are available in a share transaction. This structure often results in lower net proceeds and longer lead times for the seller.
What is an asset deal and how does it differ from a share deal?
In an asset deal, the buyer purchases specific business assets, such as the customer portfolio, inventory, machinery, intellectual property and personnel, whereas in a share deal, the shares of the company change hands. The fundamental difference lies in legal continuity: in a share transaction, the company remains intact and all assets and liabilities are automatically transferred, with contracts remaining in force.
A M&A-Transaction via an asset deal means that the buyer selectively acquires assets. This offers more control over what is acquired, but requires the individual transfer of contracts and licences. For sellers, this means that the original legal entity continues to exist, with all associated obligations.
The choice between the two structures determines the tax position, liability risks and complexity of the transaction. Whereas a share deal is common among healthy SMEs due to its legal simplicity, an asset deal is often chosen for carve-outs or when buyers wish to acquire specific parts of a business.
What are the tax disadvantages of an asset deal for the seller?
Asset deals result in a double taxation for sellers, whereby the entire profit is taxed at the corporation tax rate of 19% or 25.8%. This contrasts sharply with share transactions, where sellers can benefit from the participation exemption, which allows capital gains to be completely exempt from tax.
The tax burden manifests itself at several levels. The selling company pays corporation tax on the realised profit on the assets sold. When the proceeds are then distributed to shareholders, a second tax is levied via dividend tax or income tax.
In addition, tax facilities that are available in share deals are lost. The participation exemption, which offers substantial tax benefits in share transactions, does not apply. This results in a significantly lower net proceeds for the seller, which can significantly affect the total transaction value.
Why do sellers retain more liability in an asset deal?
In asset deals, the selling legal entity continues to exist, which means that liability risks not automatically transfer to the buyer. The seller remains responsible for all obligations that have not been explicitly transferred, including historical claims, tax obligations and contractual liabilities of the original entity.
Warranties and guarantees generally last longer than in share deals. Buyers demand extensive guarantees on the transferred assets, as they do not enjoy automatic protection through the legal continuity of the company. These guarantees can extend over several years and relate to hidden defects, tax positions and contractual obligations.
The legal complexity increases because each individual transfer must be documented and validated. Sellers must demonstrate that they are authorised to transfer specific assets and that no third-party rights are being infringed. This creates a long-term legal exposure that is largely avoided in share transactions.
How does an asset deal affect employee rights and pensions?
Asset deals complicate the transfer of employment contracts This is significant because these do not automatically transfer as they do in share transactions. Each employment relationship must be transferred individually, whereby employees must formally agree to the transfer to the new employer or specific transfer procedures must be followed.
Pension entitlements are a particularly complex issue. Employees have accrued rights in the seller's pension fund, which are not automatically transferred to the buyer. This requires the settlement of pension rights, value transfer to the new pension fund or compensation arrangements, which entails administrative complexity and costs.
The seller remains responsible for personnel-related obligations that arose prior to the transfer. This includes claims relating to working conditions, wage arrears, severance payments and other employment law claims. This long-term exposure can have financial consequences for years after the transaction.
What administrative complexities does an asset deal entail?
Asset deals require detailed documentation for each individual transfer, from machinery and stock to intellectual property and customer contracts. Each category of assets has specific transfer requirements: notarial deeds for real estate, registrations for intellectual property and individual assignments for contracts.
Contracts and licences must be analysed individually for transferability. Many contracts contain change-of-control clauses that require the consent of the contracting parties for transfer. Licences are often non-transferable and must be reapplied for by the purchaser, creating delays and uncertainty.
The lead time for asset deals is generally longer than for share deals due to this administrative complexity. Transaction costs are higher due to the extensive legal documentation, due diligence on individual assets and the need for specialised advice for different categories of transfers. For real estate, there is also a transfer tax of 10.41% (from 2025).
When is an asset deal still the best choice despite the disadvantages?
Asset deals can be strategically advantageous in selective selling of specific business units, whereby the seller wishes to retain other activities. This structure offers flexibility to transfer only profitable or strategically valuable units, while retaining problematic assets or liabilities for restructuring.
Settlement of liabilities is an important consideration. If the company has historical claims, environmental obligations or tax risks, an asset deal can isolate these risks with the seller. This may be more attractive to buyers than a share deal, in which all hidden liabilities are automatically transferred.
Specific buyer requirements may necessitate an asset deal. Strategic buyers sometimes only want to integrate certain assets into their existing operations, without the legal complexity of a full company. Private equity parties may prefer to place assets in a new structure for optimal financing and exit strategies.
The decision to opt for an asset deal requires careful consideration of the tax consequences, liability risks and transaction costs against the strategic advantages. Professional guidance is essential to navigate the complexity and achieve optimal structuring. For advice on the most suitable transaction structure for your specific situation, please contact contact with us.
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