Before price is discussed, one question shapes the entire contract: is the company sold as a whole via its shares, or are individual assets transferred? The choice between share deal and asset deal affects liability, tax, contractual relationships and the effort of completion, making it far more than a legal formality.
The share deal: ownership of the shares changes
In a share deal the buyer acquires the shares in the company. The entity itself continues unchanged; only the shareholder changes. All contracts, permits, employment relationships and banking arrangements continue without individual transfer, which makes completion considerably simpler.
The flip side is liability. The buyer takes on the company with its entire past, including unknown risks from legacy contracts, tax audits, product liability or environmental burdens. That is why due diligence is more intense in a share deal and the warranty catalogue more extensive, as described in our article on reps and warranties and W&I insurance.
The asset deal: individual assets
In an asset deal the buyer does not acquire the shell but its contents: machinery, inventory, trademarks, customer relationships, land. Each asset is identified and transferred individually. What is not in the contract does not transfer. That allows the buyer to exclude risks deliberately, such as a contaminated site or a disputed contract.
The effort is correspondingly higher. Contracts with customers, suppliers and landlords transfer only with the counterparty's consent, which becomes a project of its own across several hundred contracts. Employment relationships, by contrast, transfer automatically under German law, although employees have a right to object. Permits and licences are often personal and must be applied for again.
The tax perspective
Tax interests usually run in opposite directions. The buyer prefers the asset deal because he can allocate the price to the acquired assets and depreciate them. Any remaining goodwill is amortised over fifteen years, reducing future tax and increasing the value he attributes to the structure.
The seller generally prefers the share deal. Where an individual sells shares in a corporation, favourable regimes apply depending on the size of the holding, and where a holding company holds the shares, capital gains are largely tax exempt with five percent treated as non-deductible expense. An asset deal instead creates a fully taxable gain at company level, and a subsequent distribution is taxed again. This double burden is frequently the decisive argument against the asset deal, and the reason early transaction structuring moves more economically than any price negotiation.
When each structure fits
The share deal is the rule for healthy, established companies with many contractual relationships, for stake sales and whenever the seller uses a holding structure. The asset deal fits sole traders and partnerships where there are no shares in the strict sense, the sale of a separable business unit, and acquisitions out of insolvency where the buyer specifically does not want the legacy liabilities.
Selling a business unit requires separating it first, and how that succeeds without operational friction is described in our article on carve-out preparation. Often a middle route is sensible: the seller contributes the business into a new entity in advance and then sells its shares. Such reorganisations are subject to lock-up periods and belong two to three years before the transaction, which is exactly where solid sale preparation starts.
FAQ
Can the buyer dictate the structure? No, it is a matter of negotiation. Because the buyer's tax advantage mirrors the seller's disadvantage, the difference is frequently balanced through the price.
Do employees transfer automatically in an asset deal? Yes, employment relationships transfer with the business under section 613a of the German Civil Code. Employees must be properly informed and may object within one month.
What happens to ongoing contracts in an asset deal? They transfer only with the counterparty's consent. For critical customer or lease agreements, consent should be obtained before closing or made a condition precedent.