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  • Tudor Cristina

Share deal or Asset deal? How do you prepare yourself for a succesfull deal in M&A?

Updated: Jan 27


Buying an Existing Business in Romania: Share Deal vs. Asset Deal – Pros and Cons


Share deal vs. Asset deal

Are you considering the acquisition of an existing business in Romania but unsure of the right approach?


Let's explore the main advantages and disadvantages for each type of deal to help you make an informed decision.


Summary:

  • What exactly is a share deal and what about an asset deal?

  • Key advantages and disadvantages of a share deal.

  • Key advantages and disadvantages of an asset deal.


Let's find out more about the principal specifics of a share deal and how it works.


The specific of the share deal is that you need to buy the ownership stakes or the shares of the target company from its existing shareholders.


In an asset deal, you need to buy the specific assets and liabilities of your target company, rather than the shares or the company itself. By this kind of deal it may be purchased directly the inventory, contracts, intellectual proporty or other goods owned by the target comapny.


Share deal - key advantages and disadvantages (short description)


Advantages:


  • More favorable tax implications.

  • Legal and administrative simplicity; you take over the entire company.

  • Quick implementation of consequences with a share transfer agreement.

Disadvantages:


  • Assumption of all company liabilities (debts, lawsuits, etc.).

  • Less control with non-majority ownership stakes.

  • Necessity for shareholder consensus on significant stock or asset sales.

  • Legal due diligence required to identify risks.

​ADVANTAGES

​DISATVANTAGES

You may have more benefits from a tax perspective.

​You will come into all the company's liabilities - debts, ongoing suits etc.

A share deal is more straightforward from a legal and administrative stand point, as you are taking over the entire company together with all it has.

​If you purchased a non majority ownership stake, you may have less control over the business, if there are more shareholders.

Its consequences can be implemented more quickly, as a transfer of share agreement is needed in principale.

It will be necessary to consult with all of the shareholders and have a decision together, in case you want to offer for sale an important stock or good of the company.

​The business will remain the same, it will keep its corporate identity, permits, ongoing contracts and relationships already settled with its customers and suppliers.

​A legal due dilligence is required to identify all the risks.



Asset deal - main advantages and disadvantages (short description)


Advantages:


  • Limited liability and exposure to existing payment obligations.

  • Selective acquisition of assets and legal responsibilities.

  • Simplified negotiations.

Disadvantages:


  • Complex tax implications.

  • Need to rebuild relationships with existing customers, providers, and employees.

  • Time-consuming transfer of ongoing agreements and permits.

​ADVANTAGES

​DISATVANTAGES

​You may limit your liability and exposure to the existing outstanding payment obligations.

​Assets deals involve more tax implications of which you need to be aware of.

​You may choose which asset and legal responsability need to acquire. You may acquire just a part of them, the ones you are interested in, not parts the entire company as for the assets deal.

​You need to re-set the relationship with the already existing customers and providers, as well as with the company's employees, as these will not be trasferred as per the share deal.

Negotiations are more easy to be performed in this case.

​An asset deal is more time consuming due to the fact that it is needed to be transferred all the ongoing agreements, permits etc.


If you have any questions or need legal advice regarding these options, including share deal due diligence, please contact us at: office@cristinatudor.ro or by phone at (+40)766.706.561.

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