Shares sales when acquiring a business

When acquiring a practice, do you want the assets or the shares? Kerry Brooks explains the difference.

Where a dental practice is owned by a company, the parties can choose to transfer the business by selling the shares in the company (where the dental practice is its only asset) or by selling the assets that comprise the business. The parties may have opposing views on which structure the acquisition should take. An advantage to one party ultimately means a disadvantage to the other. More often than not, the seller will want to sell their shares, but a buyer will want to just acquire the assets.

Where the company owns many practices, a share sale may not be viable where the buyer only wants to purchase one of the businesses. The transaction must progress as an asset deal unless the parties are willing to use a hive-down structure. This is discussed later on but first, we will take a look at some areas of consideration in respect to both share and asset acquisitions from both a buyer’s perspective and a seller’s.

Share sale – a clean break?

Following transfer of the shares, the company continues to trade and its ongoing liabilities continue to be enforceable. A seller will think that they no longer have a connection to the company, but this is not entirely correct. Because a company sale is a seamless transfer, and the buyer will be taking over all liabilities (hidden or otherwise), they will want to make sure that they have investigated all aspects of the company thoroughly, leaving no stone unturned. In addition, to make sure he is doubly protected, the buyer will require wide protections in the sale agreement to…