Goodwill & Assets vs Share Sale
28/06/2019
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If you’re selling a limited company, there are two ways you can structure your deal: a goodwill & assets sale or a shares sale.
But what’s the difference, and which works better for you?
We've summarised the key definitions, pros and cons of both types of sale, to help you decide which is the right one for you.
Goodwill & Assets Sale
A goodwill & assets sale is the sale of tangible and intangible assets of a business.
Say for example you’re selling a printing company.
Your tangible assets would typically be your machinery, office equipment, stock and so forth.
Your intangible assets would include any contracts, your trading name and the ‘goodwill’ of the business.
When a buyer is deciding on what to offer for your business, the figure will be broken down in to how much they think the goodwill is worth and an amount for the assets they want to be included in the sale.
Once the transaction has gone through it will be your responsibility to resolve any remaining assets and liabilities not taken on by the new owner.
Pros of Goodwill & Assets Sales
- You will typically have less warranties and indemnities when finalising a goodwill and assets sale.
- You will also be able to keep hold of any assets you don’t want to be included in the deal.
Cons of Goodwill & Assets Sales
- When you agree a goodwill and assets sale the liabilities of the business will generally stay with you.
- You also may need to gain consent from certain third parties.
- For example, if you lease your premises your landlord would have to give permission for the lease to be assigned to a new owner.
Share Sale
In a share sale a purchaser is buying shares of the business – whether that is a percentage or the entire share capital.
Therefore, the buyer indirectly becomes the owner of everything the company owns.
This means that all the assets of the business remain with the company itself.
Pros of Share Sales
- Within a share sale there is a lot less risk involved in making sure employees, clients and suppliers stay with the company as any contracts in place will still stand.
- You might also see a better return with a share sale, as you may be eligible to claim Entrepreneurs Relief.
Cons of Share Sales
- In a share sale the company will retain all of the business’s liabilities.
- You might be required to provide certain warranties and indemnities to protect the new owner against these, or even have to provide personal guarantees.
- This could leave you exposed to personal liability – so it’s important to make sure you talk all aspects through thoroughly with a solicitor whilst your sale is going through.
Both a goodwill & assets and a share sale have their benefits and their negatives.
At the end of the day, the best method for you will depend on the nature of your business and what you want to get out of it.
If you’re currently considering your options, then why not arrange a free valuation of your business?
At this appointment, our business directors will sit down and talk you through the process, your options and advise on what to do from here.
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