Asset Sale Agreement Plc

The main advantage of an asset acquisition is that a buyer can choose the assets and liabilities he wants to acquire. The risk of hidden debt is generally lower than that of buying shares. The transfer of businesses (employment protection) (TUPE) protects the rights of workers in the event of a transfer of assets from a company. The basic principle of TUPE is that when a seller buys the company`s assets as a «current business,» the employees of that company are automatically transferred to the buyer. On this basis, the buyer and seller must contact the relevant staff at an early stage. Instead of acquiring all the shares of a company, and therefore both its assets and liabilities, a buyer very often prefers to take over only certain assets of a company. As a general rule, the company will sell the assets itself in the event of an asset acquisition, while in the case of a share sale, the individual shareholders will be the sellers. Purchasing assets allows buyers to divide the purchase price between the assets to reflect their market value. This increases depreciation deductions that result in future tax savings. A buyer will normally prefer to buy a company`s assets, while the seller prefers to sell the shares. The reason is that an investment purchase allows a buyer to choose exactly what assets they are buying and to identify precisely which liabilities they want to assume.

In addition, there may be important contracts that are not transferable or some licenses and authorizations may be clear to the seller. Sometimes a buyer wants to get as many customer relationships as possible, so he can choose to buy shares as opposed to assets. The main drawback of an asset acquisition, as opposed to a share purchase agreement, is that each item must be transferred in accordance with its correct rules and made against third parties (for example. B by consent and authorization). This is especially true for customer contracts, as a third party may view the transaction as an opportunity to renegotiate their contract.