Business acquisitions can be structured in different ways. In a share deal, shares in a company are transferred. In an asset deal, by contrast, individual assets, contracts, receivables, employment relationships and other legal positions are transferred to the buyer. Especially where an ongoing business or business unit is to be carved out of an existing structure and transferred into a new corporate vehicle, the asset deal is a frequently used form of transaction.
Asset deal and share deal – different legal starting points
In a share deal, the legal entity itself remains unchanged and only the ownership of its shares changes. Existing contracts and legal relationships therefore generally remain with the same company. In an asset deal, the individual assets and legal positions must be transferred to the buyer. This requires a careful inventory of the business and precise drafting of the purchase agreement.
Transfer of assets, receivables and contracts
The parties should define exactly which assets, receivables, rights and other positions are included in the transaction. This may cover equipment, machinery, vehicles, domains, trademarks, customer-related assets, outstanding receivables and other intangible assets. Particular attention should be paid to ongoing contracts. Lease agreements, leasing contracts, software agreements and customer contracts do not normally transfer automatically. The consent of the relevant third party is often required and should therefore be prepared and, where possible, obtained before signing or completion of the transaction.
Ongoing business and economic cut-off
Where the business continues to operate during the transaction, a clear economic cut-off is essential. The parties need to determine which revenues and expenses belong to which side, who completes existing orders and how to deal with work started before completion but finished afterwards. The treatment of receivables and partially performed contracts should also be addressed. A precise effective-date mechanism can prevent significant disputes after closing.
Employees and transfer of business
If a business or part of a business is transferred, section 613a of the German Civil Code may apply. Where the requirements of a transfer of business are met, existing employment relationships generally transfer to the buyer with their rights and obligations. Seller and buyer must also comply with the statutory information duties towards affected employees. Defective information may have serious consequences, including the possibility that the employees' objection period does not begin to run.
Acquisition concept and workforce structure
In certain situations, an acquisition concept may also be relevant. Such a concept describes how the buyer intends to continue the business from an organisational, economic and staffing perspective. It can be important in restructurings and when planning the future workforce structure. Any employment-law implementation must be carefully prepared; employees cannot simply be selected outside the applicable legal framework.
Liability and legacy obligations
The purchase agreement should clearly allocate liabilities and risks between buyer and seller. This includes liability arising from legacy orders, warranty risks, outstanding receivables and liabilities, and possible third-party claims. The agreement should also distinguish clearly between old and new orders so that responsibility for performance, remedial work and liability is not disputed later.
The purchase agreement must fit the individual transaction
Standard templates are rarely sufficient for a business acquisition. The structure of the business, industry, number of employees, existing contractual relationships, open orders and the commercial objectives of the parties can differ substantially. The agreement should therefore be tailored to the transaction and regulate the purchased assets, economic effective date, payment mechanics, liability, warranties, contract transfers, employee issues and the practical handover of the business.
Integration is part of the transaction
The transaction does not end with legal completion. Employees, IT systems, processes, customer relationships and internal structures must be integrated into the buyer's organisation. Particularly in small and medium-sized businesses, legal and commercial questions are closely connected. The law office therefore combines legal support for the transaction with a commercial perspective on its practical implementation.