Transaction structure issues to consider in share purchase transactions
Transaction structure issues to consider in share purchase transactions

The following Corporate guidance note provides comprehensive and up to date legal information covering:

  • Transaction structure issues to consider in share purchase transactions
  • Share purchase or asset purchase?
  • Auction sales

This Practice Note is part of the Share purchase transaction toolkit.

At the outset of a private company M&A transaction, the main issue for the parties and their advisers to address, apart from price, is what structure will the transaction take. Will the buyer acquire the entire issued share capital of a company (share purchase) or acquire a business as a going concern, together with certain of its assets (asset purchase)?

Another fundamental issue to address at the outset is whether the seller is only in negotiations with one buyer, or whether there are several interested parties whose approaches are all being entertained as part of an auction sale process. Conducting a sale as an auction sale will involve a different process and timetable to a regular transaction involving just one potential buyer.

Share purchase or asset purchase?

A privately-owned company/business may be acquired by way of share purchase or asset purchase.

Upon acquisition of its shares at completion of a share purchase transaction, the buyer takes over ownership of the company carrying on the business (the target company), which comes with all of its assets, obligations and liabilities (whether or not the buyer was aware of them).

Under an asset purchase transaction, the buyer selects the assets and liabilities it wishes to acquire from the seller (explicitly excluding in the acquisition documentation those assets and liabilities which it does not wish to acquire) and purchases them, together with the business in which those assets are used. It does not acquire shares in the company carrying on the business (rather, the company and any assets the buyer does not acquire are left with the