Share Deal: Acquisition of Company Shares Instead of Assets

In corporate transactions, two fundamental transfer methods are generally available: the Asset Deal and the Share Deal. Unlike the Asset Deal, where individual assets are acquired, a Share Deal involves the purchase of company shares. The buyer thereby takes over the company as a whole, including all rights and obligations. This form of transaction offers specific advantages and disadvantages for both buyers and sellers.

The defining feature of a Share Deal is the acquisition of shares in the target company. Depending on the legal form, these can be shares (in the case of a stock corporation, AG), GmbH shares, or shares in partnerships (KG, OHG). By acquiring the shares, the buyer steps into the position of a shareholder and indirectly assumes all assets, liabilities, and contracts of the company.

In contrast to the Asset Deal, the legal identity of the company remains unchanged in a Share Deal. Only the shareholder structure changes, while the company itself continues to exist with all its legal relationships. Contract partners, employees, authorities, and other third parties are generally not affected by the change of ownership.

The legal implementation of a Share Deal depends on the legal form of the target company:

For a GmbH, the transfer of shares requires notarization (§ 15 para. 3 GmbHG).
For stock corporations, the transfer of shares depends on the type of shares and is effected by endorsement, delivery, or assignment.
For partnerships, the transfer is governed by the partnership agreement and usually requires the consent of the other partners.

The Share Deal offers several advantages, notably:

Legal Continuity: Since only the shares are transferred, all contracts, permits, and legal positions of the company remain intact. This ensures seamless continuation of business operations.
Lower Transaction Complexity: Compared to an Asset Deal, a Share Deal is often less complex, as individual assets do not need to be transferred separately.
No Third-Party Consent Required: Generally, the transfer of company shares does not require the consent of the company’s contract partners, simplifying the process.
Tax Advantages: For the seller, a Share Deal can be tax-efficient. Capital gains may be tax-exempt or subject to reduced taxation under certain conditions.
Transfer of All Economic Goods: Even assets that are difficult to transfer (such as non-transferable permits, de facto business relationships, or goodwill) are indirectly transferred to the buyer.

However, these advantages are counterbalanced by certain disadvantages and risks:

Liability Risks: The buyer assumes all known and unknown liabilities and risks of the company, including those arising before the acquisition (“skeletons in the closet”).
No Revaluation: Unlike in an Asset Deal, the acquired assets cannot be revalued or depreciated anew in a Share Deal, which may have tax disadvantages.
Corporate Law Complexity: Depending on the company form and agreement, there may be special requirements or restrictions on the transfer of shares.
Approval Requirements: Larger transactions may require antitrust approvals or sector-specific permits (e.g., in the financial or energy sectors).

Whether a Share Deal or an Asset Deal is preferable always depends on the specific circumstances of the case, particularly the buyer’s strategic objectives, the structure of the target company, tax considerations, and the specific risks and opportunities of the transaction.

The execution of a Share Deal typically proceeds in several phases:

Strategic Planning and Target Company Selection: The buyer defines their acquisition strategy and identifies suitable target companies.
Preliminary Negotiations and Letter of Intent: Initial discussions establish fundamental transaction parameters (object of purchase, price range, timeline) and are often documented in a non-binding Letter of Intent (LoI) or Term Sheet.
Due Diligence: The buyer conducts a comprehensive review of the target company (legal, financial, tax, technical, etc.) to assess opportunities and risks.
Contract Negotiations: Based on due diligence findings, the purchase agreement (Share Purchase Agreement, SPA) is negotiated, detailing purchase price, warranties, guarantees, conditions, and execution modalities.
Signing: By signing the purchase agreement, the parties commit to executing the transaction.
Closing: At closing, the shares are transferred and the purchase price paid. This may occur immediately after signing or at a later date, subject to conditions such as regulatory approvals.
Post-Merger Integration: After closing, the acquired company is integrated into the buyer’s organizational structure.

Several aspects must be considered in the legal and tax structuring of a Share Deal:

Purchase Price Structuring: Besides the amount, adjustment mechanisms (e.g., closing accounts, locked box, earn-out) and payment terms (lump sum, installments, escrow accounts) must be defined.
Warranties and Representations: The seller typically provides extensive assurances regarding the company’s condition. Breach of these warranties entitles the buyer to damages or other remedies.
Due Diligence and Disclosure: During due diligence, the seller discloses information about the company. This disclosure can limit the seller’s liability for warranty breaches.
Conditions Precedent: Closing is often subject to conditions such as regulatory approvals, third-party consents, or absence of material adverse changes.
Tax Structuring: Depending on the situation, certain transaction structures may offer tax advantages, including whether the buyer acquires shares directly or via an intermediate holding company.

Given the legal and economic complexity of Share Deals, expert advice in M&A, corporate law, and tax law is indispensable. Such expertise helps structure the transaction, minimize risks, and ensure a smooth process.

Practical Examples and Use Cases

Share Deals are particularly advantageous in the following situations:

Complex Companies: For companies with numerous contracts, permits, or hard-to-transfer assets, a Share Deal is often the simpler option.
Tax Optimization for Sellers: If the seller is an individual, tax benefits such as partial income procedures or exemptions under certain conditions may apply.
Industry-Specific Reasons: In certain sectors (e.g., real estate), Share Deals can offer advantages regarding real estate transfer tax or other taxes.
Strategic Acquisitions: For full takeovers aimed at integration into the buyer’s group, the Share Deal is often preferred.

Typical use cases for Share Deals include:

Acquisition of a GmbH by a strategic investor
Succession planning in family-owned businesses
Private equity investments
Intra-group restructurings and share transfers

Summary and Outlook

The Share Deal represents an important and frequently used option for corporate transactions. Its advantages lie primarily in legal continuity, reduced transaction complexity, and potential tax benefits for sellers. The main disadvantages are the assumption of all liabilities and the absence of asset revaluation.

The choice between Share Deal and Asset Deal should always be based on a careful analysis of the specific circumstances, considering strategic, legal, and tax aspects. Professional advice is essential to optimize transaction opportunities and minimize risks.

With increasing complexity in the corporate landscape and growing regulatory requirements, structuring Share Deals is becoming more complex. It is therefore all the more important to set the right course early and manage the transaction process professionally.

Share Deal

Practical Examples and Use Cases

Summary and Outlook

How much is your company worth?

Table of contents

Share Deal