You’ve decided to transfer your business, but you haven’t yet determined how to proceed. Two options are available: an asset sale (Asset Deal) or a share sale (Share Deal). Each approach has its advantages and disadvantages, which must be evaluated for your specific situation; every business transfer is unique!
As you might expect, there is no universal answer, only key considerations that will help you make an informed choice tailored to your context and goals.
The Share Deal
If you opt for a Share Deal, the buyer will purchase your shares and become the rightful owner of your company. The proceeds from the sale will not be subject to taxation, meaning you won’t have to pay any taxes on the transaction.
This may seem like the simplest and most advantageous option at first glance, but don’t be fooled, it comes with its challenges. Even if you believe you have no “skeletons in the closet,” you will remain liable for potential claims from the buyer for a period defined in the share purchase agreement. It is, therefore, advisable to set aside a portion of the sale proceeds to cover any potential claims.
When selling shares, buyers often include earn-out clauses (a portion of the price that is conditional) and/or seller financing, both of which create uncertainty regarding the final outcome of the sale for several years.
From a financing perspective, banks typically fund share acquisitions over a seven-year period, which can make the transaction more difficult to execute.
Should You Consider an Asset Deal Instead?
Again, there is no one-size-fits-all answer!
Buyers tend to prefer Asset Deals because they acquire only the assets of the business—plus goodwill—leaving all past liabilities with the seller. This allows them to focus on growing the business without worrying about historical risks. Additionally, buyers can amortize the acquisition of the business assets for tax purposes, and asset purchases are often financed over longer periods than share purchases.
However, an Asset Deal also comes with certain drawbacks for the buyer, such as registration fees on real estate assets, loss of certifications, and loss of the company’s VAT number.
On the seller’s side, it is not you but your company that sells the assets. As a result, the proceeds from the sale are subject to corporate tax. Moreover, when you later liquidate your company or distribute dividends, you will be taxed again through withholding tax. Tax implications should, therefore, be carefully considered when determining the selling price.
How BestValue can help
At BestValue, we conduct an in-depth analysis of each transaction to propose the best solution for your needs. Don’t hesitate to contact us to discuss your options!
