Business Sales & Purchases

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Guiding your business through strategic sales and acquisitions with commercial insight.

Every business sale or purchase marks a pivotal moment in your company’s journey. Whether you’re expanding through acquisition or planning your exit strategy, our approach combines deep technical expertise with practical, commercial guidance to help achieve your goals.

Our corporate lawyers understand that each transaction tells its own story. From building your business through acquisitions, acquiring a distressed business from an administrator or selling your business to a trade buyer, private equity house or to management, we take time to understand your commercial objectives before providing solutions that align with your specific needs.

Our corporate team’s experience spans both sides of transactions, giving us valuable insight into the challenges and priorities of buyers and sellers.

Transaction Structures: making informed choices

Understanding Transaction Structures

In addition to the variety of transaction types (trade sales, MBOs, EOTs etc.), our corporate team regularly assist clients with how to structure their transaction, including whether it sit should comprise a share sale or a business / asset disposal. Each offers distinct advantages and requires careful consideration of your specific circumstances.

For businesses owned by individuals or partnerships, an asset sale is the default route (unless the business is first incorporated). With a limited company, both options are typically available.

Often the appropriate solution can require a combined approach, in which the target business is subject to some internal reorganisation including the disposal of a retained division or collection of retained assets prior to a share sale.

Our corporate team are experienced in guiding clients through the options and will help you evaluate which best serves your objectives.

When choosing between an asset or a share deal, there are advantages and disadvantages for both buyer and seller, including:

Continuity

• Share sale –the legal entity carrying on the business will continue (under new ownership)and, externally, very little will have changed. This also means that existing contracts are less likely to be affected (although some contracts can contain terms that allow for termination, or require notice, if there is a change of ownership)
• Asset sale – the buyer will acquire the trade of the selling entity. The transfer of some assets may need to be “perfected” via additional steps (such as the registration of real estate transfers with the land registry and the transfer of domain names). All existing contracts must also be assigned to the buyer (which often requires the consent of the relevant customer or supplier)

Liability

• Share sale – all of the existing liabilities of the business remain with the company and so must be factored into the purchase price by the buyer. As a result of this, the buyer will be keen to obtain appropriate certainty on the liability exposure (via diligence and contractual protections). An underlying liability will remain with the company even if the buyer (and/or the seller) did not know about it
• Asset sale – in most cases, existing liabilities remain with the seller, unless the buyer expressly agrees to acquire them (which will typically require third party consent) and/or for the buyer to indemnify the seller for such liabilities

Employees

The treatment of staff is quite different between a share sale and an asset sale. On a share sale, the employer does not change. On an asset sale, the employees will transfer to a new employer. This usually happens by automatic operation of law and is extremely difficult to avoid.

The Transfer of Undertakings (Protection of Employment) Regulations (often known as TUPE) mean that not only do the employees automatically transfer to the new owner of a business, but they do so as if they had always been employed by the buyer, so all existing liabilities of the seller are assumed by the buyer.

Assets

• Share sale – assuming that the assets of a business belong to the company, the assets will all remain under the ownership of the company when the shares are transferred to the buyer, even if the buyer and/or seller were unaware of them
• Asset sale – the assets will each need to be transferred to the seller. The parties can “cherry pick” which assets it wants to acquire and the agreement between the buyer and seller must identify which assets are being sold and which are being retained by the seller

VAT

• Share sales – VAT is not chargeable on a sale of shares
• Asset sales – VAT is not chargeable if is the sale of a “going concern”. If this condition is not met, then VAT may be payable on the transfer of the assets

Stamp Duty

• Share sales – stamp duty is payable at the rate 0.5% of the purchase price
• Asset sales – stamp duty is not payable on the transfer of most assets. The most obvious type of asset where stamp duty will be payable in on the transfer is land

There are also many common elements in a business sale, whether it proceeds as a share sale or as an asset sale.

In each case the buyer will wish to undertake due diligence enquiries, to ensure that it knows what it is buying and to underpin this exercise with contractually binding provisions regarding the business and its assets (known as warranties and indemnities).

The parties will also need to negotiate and agree the price and payment terms. Notably, the parties may want to agree a mechanism to adjust the purchase price to take account of the financial position of the business at completion (such as a stock take or to clarify the cash, debt and working capital position at completion).

They may also agree an enhanced or reduced purchase price based on the opportunity that the business offers in respect of future performance (referred to as an earn-out).

Tax

The tax treatment for both buyer and seller may vary according to whether the deal is a share sale or an asset sale. Tax issues that commonly arise relate to the structuring of the acquisition vehicle and how to use retained earnings in a tax efficient way to finance part of the purchase price.

We also commonly see tax issues arising in relation to the structure of the purchase price, particularly with deferred consideration and the use of loan notes or consideration shares in the acquirer.

We have significant experience with these issues and work with tax advisers and accountants at an early stage to ensure that the transaction is tax efficient.

Next steps

Ready to explore your transaction options? Our corporate team can help you:

• Evaluate structure alternatives
• Plan efficient approaches
• Navigate complex requirements
• Achieve your commercial objectives