Company acquisitions: assets versus shares

Buying a business can be an exciting time but did you know there are different ways to buy a company? When you know the finer details of the process, you may actually find a number of different options to make your purchase a worthwhile decision.

This article will explore two popular methods of acquiring a company and their respective benefits:

• Acquisition through company assets


• Acquisition through company shares

Having flexibility in acquiring a company can be extremely helpful when you’re looking to test the waters or are not available to take on the complete running of the company.

Acquisition through company assets

In an asset purchase, the buyer will only take on assets and rights that are owned by the selling business. In such a situation, all liabilities are retained by the company in question, and the negotiations are held between the buying individual and the company as a whole (not the owner) as the business is the one that holds the assets. The monies from the transaction will then go into the business’s bank account. The original owner will continue to run the company but now the subject assets will belong to the new owner.

Assets can include physical stock in the form of machinery, vehicles, tools and technical equipment, as well as intangible goods such as accounts receivable and cash in bank accounts. These both appear on balance sheets, but there are also other assets that can be purchased that are often forgotten about as they don’t appear on balance sheets – these include licences, trademarks and patents, copyrights, etc.



When it comes to staff, however, the Transfer of Undertakings (Protection of Employees) Regulations 2006 (TUPE) will be something to consider. Regardless of which assets are purchased, under the TUPE, the buyer will automatically take on all the employees from the seller under their current terms of employment, and will inherit all the existing liabilities concerning staff members. Certain procedures must be followed by both parties to ensure that all employees are represented and safeguarded by TUPE.

Staff aside, in an acquisition through company assets, the buyer can be selective in their choice of assets so as to benefit their portfolio, and avoid taking on too many liabilities. This is particularly advantageous where the company has numerous types of liabilities or does not disclose all its liabilities.

Asset purchases also have interesting tax advantages as they allow buyers the chance to claim capital allowances, and the acquisition price of the assets can be deducted from the profits of the business before determining the tax payable.

Acquisition through company shares

Purchasing shares to acquire a company brings a different set of advantages and benefits. First and foremost, acquisition through company shares will allow the buyer to completely own the company in question, along with all its assets, liabilities as well as all business obligations and duties. In essence, the original owner will step down and the buyer will replace them. Because the negotiations are carried out between individuals and not between the buyer and the company, any money paid for the shares will go directly to the original owner. The ownership will then pass to the buyer.



While matters related to TUPE will not apply in an acquisition through shares, as the official employer will not change, the buyer will take on all the assets and liabilities whether they like it or not, as they belong to the business as a whole. So with a share acquisition, there is a distinctive lack of choice in the assets and liabilities for the buyer. But there are tax reliefs in that buyers can lower their capital gains tax depending on their percentage of shareholdings.



Generally speaking, buyers prefer to purchase assets as it gives the individual the opportunity to gradually acquire the company in question and test the waters. However, sellers prefer to sell shares than assets due to the tax efficiency it affords them, and the ability to remove themselves cleanly from the company as a whole.

There are certainly a number of things to look into when buying a business, the method of acquisition being one of the key factors. By determining whether you intend to acquire a company through shares or assets, you can reap the relevant benefits and pick and choose the responsibilities you want to take of the new company.


Are you interested in buying a company and driving your own deals? To learn more, view our in-depth article on What’s Driving Deals in 2018?

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