Share Sales vs Business Sales: Breaking Down the Differences

Share Sales vs Business Sales: Breaking Down the Differences with Lauren Gross

When purchasing or selling a business, the parties must agree on the transaction structure of the acquisition. Therefore, an important choice is to be made – share sale or business sale? This mini-series explains what each transaction structure is and the key differences between them. They are fundamentally different structures and each can have positive and negative implications for sellers and buyers. The series begins with a foundational discussion on the fundamental differences between the two types of sales, emphasising their implications on taxes, liabilities, and overall transaction structures. Through a case study, the series exemplifies the challenges and strategies involved in negotiating and completing the transactions, highlighting the importance of due diligence, the role of warranties and indemnities, and the differences in processes of each transaction. The concluding episode broadens the perspective, discussing current trends, the LIV standard contract and the intersection between this commercial area of law and other areas such as property, tax and employment.

The Differences Between a Share Sale and a Business Sale

The first episode lays the groundwork by distinguishing between share sales and business sales. It outlines the key legal differences and considerations for buyers and sellers when choosing a transaction structure such as tax and liabilities, and what to expect throughout the transaction.

Choosing a Structure: Tax is Not the Sole Consideration

In the second episode, the focus shifts to practical application through a case study of a furniture manufacturing share sale. This real-world example illustrates the complexities to consider when choosing a transaction structure – a better tax outcome is not the only consideration. The episode highlights the importance of due diligence at the outset and explains how lawyers draft and negotiate a contract to limit the liability of their client.

Transaction Trends: Earn Outs and Vendor Assistance

The final episode looks at the emerging trends in the field of mergers and acquisitions, including more transactions with foreign investments and earn out mechanisms. It discusses what clients should think about if they are agreeing to a post settlement assistance period and when things don’t go so well after settlement.