Share deal versus asset deal: choosing the right form of acquisition in a company purchase

In a share deal the buyer acquires the shares in the company, such as the business shares of a limited company. The target company continues to exist as a legal entity; only its owner changes. All contracts, receivables, liabilities, permits and employees remain with the company. One speaks of a universal succession at the level of the participation.

This route is often simpler to implement because not every individual asset has to be transferred. Contracts with customers and suppliers in principle continue, unless a change-of-control clause applies. The flip side is that the buyer acquires the company together with its past: known and unknown legacy risks, tax risks and disputes remain in the company.

Precisely for this reason warranties are especially important in a share deal. Because the buyer takes on the entire company with its history, a carefully negotiated warranty catalogue protects it against hidden risks. How this catalogue is built is shown in the post on the SPA warranty catalogue.

In an asset deal the buyer acquires not the company but individual assets: machines, inventory, trademark rights, contracts or real estate. Each item is transferred individually; one speaks of singular succession. The principle of specificity applies, that is, every asset to pass must be precisely identified in the contract.

The advantage lies in the selection: the buyer takes on only what it wants to take on and can leave behind unwanted risks. The disadvantage is the greater effort. Contracts do not pass automatically. The transfer of a contract requires a transfer of contract, which as a rule needs the consent of the respective contract partner. Without this consent the contract stays with the seller.

In an asset deal too a business can pass as a whole. Then special liability rules and employment law apply, which the next section addresses. A deeper look at the transfer of individual assets is offered by the post on real estate in the asset deal.

In an asset deal several liability rules protect the creditors of the seller. If the buyer takes over a business as a going concern, it is in principle liable under section 38 UGB for the business-related liabilities, although this liability can be excluded under certain conditions. Section 1409 ABGB establishes a liability on the takeover of an estate or business, and section 14 BAO governs the liability for certain taxes of the predecessor.

In a share deal this question arises differently. Because the company remains in place as debtor, nothing changes in its liabilities. The buyer is not personally liable but bears the risk economically through its participation. For tax, on the acquisition of shares in companies holding real estate, real estate transfer tax can arise from a concentration of shares of 95 per cent.

In an asset deal the transfer of real estate immediately triggers real estate transfer tax. The tax bases and the depreciation options also differ. Which route is more favourable for tax can only be assessed case by case. The concept of the concentration of shares we explain in the glossary.

An important common feature of both routes is the transfer of business. If a business or a separable part of a business passes, the employment relationships transfer to the acquirer under the Employment Contract Law Adaptation Act. This applies regardless of whether the business passes through a share deal or an asset deal, provided the requirements of a transfer of business are met.

In a share deal this is usually the case from the outset, because the company and thus the business as a whole is preserved. In an asset deal it depends on whether the transferred assets form a business. Whoever underestimates the employment law consequences here risks unplanned obligations towards the employees. A deeper look is offered by the post on the transfer of business under AVRAG.

The choice of the form of acquisition is thus not only a question of taxes but also of liability and employment law. An initial assessment of the risks of your transaction is provided by our M&A transaction risk profile.