Buying the Business, Not the Company?
Many business owners assume every acquisition involves buying shares in a company.
In reality, many deals are structured as asset purchases instead.
Choosing the right structure at the outset can have a significant impact on risk, tax, cost and the overall success of the transaction.
What's the Difference?
A share purchase involves buying the company itself.
That means the buyer acquires everything - the assets, contracts, employees and, importantly, the company's existing liabilities.
An asset purchase is different.
The buyer selects the assets it wants to acquire and agrees which liabilities, if any, it is prepared to assume.
That flexibility is often one of the biggest attractions of an asset deal.
Why Buyers Often Prefer Asset Purchases
Asset purchases allow buyers to be selective.
Rather than inheriting the entire company, they can focus on acquiring the parts of the business that create value.
For example:
• Property and equipment
• Stock
• Intellectual property
• Customer relationships
• Goodwill
Historic liabilities can often be left behind with the selling company, reducing the buyer's overall risk.
Greater Flexibility Comes with Greater Complexity
While an asset purchase offers more flexibility, it also involves more work.
Unlike a share purchase, assets do not automatically transfer.
Each asset needs to be identified and, in many cases, transferred separately.
That can mean:
• Assigning contracts
• Transferring intellectual property
• Obtaining landlord consent for leasehold premises
• Seeking approval from customers, suppliers or lenders
Missing one of these steps can delay completion or prevent key assets from transferring altogether.
Due Diligence Becomes Even More Important
An asset purchase is only as good as the assets you're actually buying.
A thorough due diligence exercise should confirm:
• Ownership of the assets
• Which contracts can be transferred
• Whether third-party consents are required
• Any regulatory or licensing issues
• Potential employee obligations
The findings will often shape both the purchase price and the protections included in the Asset Purchase Agreement.
Don't Overlook the Employees
Many business owners assume employees simply stay with the seller.
That's not always the case.
Where the Transfer of Undertakings (Protection of Employment) Regulations (TUPE) apply, employees assigned to the business may transfer automatically to the buyer, together with many of their existing employment rights.
Understanding these obligations early helps avoid delays, disputes and unexpected costs.
The Asset Purchase Agreement
The Asset Purchase Agreement is much more than a contract recording the sale price.
It sets out:
• Exactly what is being bought
• Which liabilities are transferring
• How and when assets will transfer
• The warranties and indemnities protecting the buyer
• The obligations of both parties before and after completion
A well-drafted agreement provides certainty and helps ensure the legal documentation reflects the commercial deal.
Common Pitfalls We See
• Assuming contracts transfer automatically
• Failing to identify all of the assets being sold
• Leaving third-party consents until the last minute
• Underestimating TUPE obligations
• Choosing an asset purchase without considering the tax implications
The best time to address these issues is before heads of terms are agreed.
Our Approach at Daly McCormick
At Daly McCormick LLP, we help clients decide on the right structure before the legal drafting begins.
We:
• Advise whether an asset or share purchase is the better option
• Work closely with accountants and tax advisers throughout the transaction
• Identify legal and commercial risks early
• Focus on practical, commercially driven solutions that keep deals moving
Because the right structure often makes the difference between a straightforward transaction and an expensive one.
Thinking about buying or selling a business?
Whether you're acquiring an entire company or just part of a business, getting the structure right from the outset can save significant time, cost and risk.
We're always happy to have an initial chat.
Disclaimer: The information provided here does not, and is not intended to, constitute legal advice. Instead, the information and content available are for general informational purposes only.
