The current structure for a corporate acquisition is absolutely essential as in any funding requirements. Assuming the target business is trading through a corporate entity, the sale/purchase of a business can be facilitated either by purchase of shares or assets. Our mergers and acquisitions team can advise on the most appropriate structure for acquisitions, and assist in sourcing funding if it is required.
In general, a buyer will prefer to buy assets and a seller will prefer a shares deal. The final structure, however, will be determined by a variety of factors.
In this case, the shares in the company are sold by the seller to the buyer. For a seller, a share sale is attractive as the deal is effectively inclusive of all assets and liabilities and current tax legislation provides preferential tax treatment through Entrepreneurs’ relief.
However, with share sales the buyer inherits all the liabilities in addition to the assets, together with the history of the business and so a share deal when buying an existing business can be quite risky for a buyer. In mitigation, the buyer will normally carry out an extensive due diligence exercise, and protection can be afforded through warranties and indemnities in the sale and purchase agreement.
In this case, the buyer selects the asset it wants and can choose to leave the liabilities behind, leaving the seller to clear them from sales proceeds. In the case of a corporate sale of assets, the company must then be liquidated to place the sales proceeds in the hands of the corporate owners. Consequently, there is less risk for a buyer in the case of an asset's purchase, as the asset's history is not transferred to the buyer.
A drawback with asset purchases is the requirement to novate contracts to the buyer which often requires third party consent.
Buying and selling a property can be a stressful undertaking and our team of experts can guide you through the process, the tax implications, and work with your legal advisers to free you to concentrate on your business.
Selling a business is an important process that should not be taken lightly. Ensuring that you have the right team behind you providing the correct financial and tax advice and the benefit of their expertise is imperative. We have the experience, track record and expertise that you need for a successful properly structured sale.
Starting a business is an exciting time but also a daunting process, with so much to think about and action required to get it off the ground. Our business services and online services teams have a wealth of experience to share with you and assist and guide you through the process.