Asset Deal: Acquisition of Assets Instead of Company Shares

When acquiring a business, two fundamental transaction types are available: the share deal and the asset deal. While a share deal involves purchasing shares in the target company, an asset deal focuses on the targeted acquisition of individual assets and legal positions of the business. The asset deal thus presents specific opportunities and challenges for both buyers and sellers.

Characteristics and Structure of the Asset Deal

The defining feature of an asset deal is that not the company as a whole, but selected parts of it are transferred. The buyer acquires specific assets and assumes associated contracts and legal relationships. These can include tangible assets such as real estate, buildings, machinery, or inventory, as well as intangible assets like patents, licenses, trademarks, or customer relationships.

A key difference from the share deal is that the buyer in an asset deal does not automatically assume all rights and obligations of the target company. Instead, the buyer can selectively decide which assets and contracts to take over and which to exclude. Assets and liabilities not transferred remain with the seller.

From a legal perspective, the asset deal is not a single transaction but a series of individual transfers. Each category of assets is subject to specific formal requirements and transfer mechanisms. For example, the transfer of real estate requires notarization, whereas movable property often only requires agreement and delivery.

Advantages and Disadvantages of the Asset Deal

The asset deal offers several advantages, especially for the buyer:

Flexibility and Selectivity: The buyer can acquire precisely the assets needed to continue the business operations. Unnecessary or risky assets and contracts can be excluded.
Limitation of Liability: Unlike in a share deal, the buyer generally does not assume the target company’s pre-existing liabilities in an asset deal. This reduces the risk of hidden liabilities.
Tax Depreciation: The acquired assets can be newly capitalized and depreciated by the buyer, resulting in a higher tax base.
Avoidance of Approval Requirements: Unlike a share deal, an asset deal typically does not require shareholder approval. Antitrust or sector-specific regulatory approvals often do not apply.

However, there are also some disadvantages and challenges:

Higher Transaction Effort: Due to the multitude of individual transfers, an asset deal is often more time-consuming and costly than a share deal. Each asset must be identified, valued, and transferred separately.
Third-Party Consent Requirements: The transfer of certain contracts and legal positions (e.g., lease or license agreements) often requires the consent of the respective contracting parties. This can delay or block the transaction process.
Double Taxation: Capital gains from the asset deal are taxed both at the corporate level (corporate income tax, trade tax) and at the shareholder level (income tax). A share deal can be more tax-efficient in this regard.
Remaining Assets: Assets and liabilities not transferred remain with the seller, who must manage their further utilization or settlement, which can be complex and costly.

Whether an asset deal or a share deal is the preferred transaction form always depends on the individual case. Key factors include the interests and objectives of the parties involved, the structure and constitution of the target company, tax considerations, and the opportunities and risks associated with the transaction.

Process and Structuring of the Asset Deal

The actual execution of an asset deal typically proceeds in several steps:

Identification and Due Diligence: First, the assets and legal positions to be transferred are identified and subjected to thorough due diligence. This involves legal, economic, and tax analysis of the target assets.
Purchase Agreement and Transfer Documents: The transfer of assets is effected through one or more purchase agreements and supplementary transfer agreements. These documents specify the exact terms of the transaction (purchase price, warranties, conditions, etc.).
Individual Transfers: After signing the contractual documents, the individual transfers of assets and contracts take place. Depending on the type of asset, different formal requirements and transfer acts (e.g., land registry entries, delivery, assignment) must be observed.
Purchase Price Payment and Completion: Once all transfer acts are fulfilled and the purchase price is paid, the asset deal is completed. The buyer then owns the acquired assets and can continue the assumed business.

When structuring an asset deal, a number of legal and tax aspects must be considered, including:

The correct delineation and valuation of the assets and legal positions to be transferred
The handling of contracts and approvals that cannot or should not be transferred
The allocation of the purchase price to individual assets and tax optimization of the transaction
The design of seller warranties and guarantees as well as liability exclusions and limitations
Ensuring business continuity, particularly with regard to employees, customers, and suppliers

Given this complexity, early involvement of experienced transaction advisors—such as auditors, tax consultants, and M&A attorneys—is essential in an asset deal. They can assist in assessing the transaction’s opportunities and risks, optimizing contract drafting, and ensuring a smooth transition of business operations.

Asset Deal