Asset purchase vs Share purchase
The structure of an acquisition changes what you are buying, what you inherit and what a lender can take security over. It is a funding decision as much as a legal one, and it should be settled before terms are agreed.
| Criterion | Asset purchase | Share purchase |
|---|---|---|
| What transfers | Selected assets and contracts | The whole company, including history |
| Liabilities inherited | Only those specifically assumed | All of them, known and unknown |
| Contract continuity | Consents often required | Contracts usually continue unchanged |
| Security for lenders | Clean charge over acquired assets | Charge over shares and company assets |
| Seller preference | Usually opposed | Usually preferred |
| Completion time | Longer where consents are needed | Often faster |
An asset purchase lets you take the parts of the business you want and leave the liabilities you do not. Historic tax exposure, litigation and dormant obligations generally stay with the seller, which reduces the diligence burden and the risk of an unpleasant discovery after completion.
Lenders often prefer it too, because they take security over identified assets with a clean title rather than over a company carrying unquantified history.
A share sale is a clean exit. The seller leaves the liabilities behind with the company and, in many jurisdictions, faces a more favourable tax position. That is why price and structure are traded against each other in almost every negotiation.
Where a share purchase is unavoidable, the protection comes from warranties, indemnities and, increasingly, warranty and indemnity insurance, which lenders are comfortable with when properly scoped.
Asset purchases lend themselves to asset backed funding, since the acquired plant, property and receivables can be charged directly and drawn against from day one.
Share purchases usually need cash flow lending supported by the target's earnings, often with debt pushed down into the target after completion. That takes longer to structure and carries more conditions, so build the extra time into the timetable.
Buy assets where you can, particularly where the target's history is uncertain. Accept a share purchase where contracts, licences or seller position require it, and price the inherited risk into the deal.
A share purchase usually, because third party consents to transfer contracts are not needed.
Yes, but the structures differ. Confirm the acquisition structure before seeking terms, since it changes what lenders can offer.
In most jurisdictions employees transfer automatically in both structures, subject to local employment law.
Not sure which route fits? Describe the requirement once and we will structure it and approach the providers whose criteria match. No upfront fees — charges are due only once funding is in place.
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