There are several different types of transactions, types of Buyers and types of processes. All to be considered in setting your sales strategy. Additionally, the type of transaction could have huge tax implications as well. Be sure to consult with your tax advisor before you determine the adequate transaction type.
In a share deal, the shares of the Company are sold. This can either be 100% of the shares, which is called a full enterprise sale, or less than 100% of the shares. In the case the owner keeps more then 51% of the shares (in other words: sell 49% or less) this is called the selling of a minority share. If 51% or more is sold this is called a majority share sale.
When determining how much shares of your business you prefer to sell, consider the type of Buyer you wish to attract. A full enterprise sale is possible for a strategic or financial Buyer. However, strategic Buyers are less interested if you do not sell 100% of your shares. Additionally, financial Buyers will want to have control of your business and likely do not accept a minority share.
Not selling 100% of the shares can be a negotiation tactic. If you find that negotiations with a Buyer are going difficult and you cannot reach agreement on the price, consider selling only a portion of your shares now and provide the Buyer with an option to acquire the remaining shares later.
In an asset deal not the shares but only specific assets are sold. Employees or customer contracts are also considered assets. While more beneficial for a Buyer it has more complex elements as all assets to be transferred need to be defined and valued. A Seller could be left with an empty entity and this type of deal has more tax implications compared to a share deal.
Consult with an experienced tax specialist before choosing an asset deal
An asset deal should only be used when you wish to continue with your business but want to divest only a portion of your business, such as a brand or business unit. When you want to sell your entire business a share deal is better for you as a Seller. Potentially, a Buyer prefers an asset deal due to less risk for him. However, in this case you will be left with the legal entity which holds all liabilities (e.g., historic tax liabilities or guarantee commitments).
When not the completely Company is sold, but only a specific business this is called a carve-out. For example, a Company sells products in two distinct markets, being: agriculture and health service, but decides to sell only its agriculture business unit.
A carve-out brings additional complexity to a deal. For example, specific financials for the carve-out only need to be prepared, a list of employees split to each business is required (which can prove difficult if some employees work for both businesses, an employee cannot be split in %), what happens in case of shared contracts or shared services, etc. A carve out is generally structured as an asset deal.
When planning to sell only a portion of your business the hiring of a financial advisor is recommended. This advisor helps you to prepare the stand-alone financials and map the potential shared services between the new and old business which need to be resolved pre-divestment.
It is likely your business is fully integrated and all business units work together. Unwinding a fully integrated business takes time. Post-transaction it is possible you need to work together with the Buyer and you need to keep offering specific services. For example, if the business unit you want to carve out makes use of your IT infrastructure, ERP accounting software and other shared services (e.g., HR). In these cases you need to make a contractual agreement which indicates which type of services need to be performed, for how long and how much compensation you will receive. These type of agreements are called Service Level Agreements or SLAs.
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