Asset deal or share deal? A decision framework

What is transferred in an asset deal and in a share deal

In an asset deal, individual assets are transferred — in real estate transactions in particular the land and the building together with the related legal relationships. The object of purchase is comparatively clearly defined.

In a share deal, shares in the target or property-holding company are transferred. The company generally remains the owner of its assets and the contracting party to its existing contracts. In material financing, lease, operator and other key contracts, however, change-of-control, consent or other provisions may be relevant. What legal consequences arise in a specific case should be reviewed by the respective legal advisers.

Economic factors that influence the choice of structure

First, the scope of review. Acquiring shares means acquiring a company with a history. Corporate, tax, financing and accounting topics then belong in the due diligence; warranties and indemnities can address risks, but their reach depends on the drafting.

Second, the tax dimension. Asset deals and share deals can have different tax consequences for buyer and seller. For real estate located in Germany, these may include income tax aspects, depreciation bases under German tax law and German real estate transfer tax. The legal and tax consequences differ by jurisdiction and should be reviewed by the respective local advisers before the transaction structure is fixed.

Third, financing. An existing financing can in principle remain with the company, provided the finance documents allow it and the required lender consents are obtained. Depending on drafting, change-of-control provisions may concern consent, information, adjustment, termination or repayment rights.

Fourth, the buyer universe. Some institutional investors do not acquire companies with a history for internal reasons; others expressly prefer share acquisitions because they consolidate into existing structures. Committing early narrows the addressable market.

Real estate transfer tax in Germany: general context

For German real estate transactions, share transfers in property-holding companies can, under certain conditions, also trigger real estate transfer tax. What matters are the provisions of the German Real Estate Transfer Tax Act, in particular the taxable events, participation thresholds and time periods set out there.

Which events apply in a specific case, and what tax consequences arise, should be reviewed by a tax adviser. The notion that a share deal simply avoids real estate transfer tax does not hold. Other jurisdictions apply different rules; assessment there belongs with the respective local advisers.

What this means economically

The chosen transaction structure can materially affect price, tax position, financing, buyer universe and risk allocation. That is precisely why it belongs at the beginning of the process.

In practice we proceed as follows: before going to market, the structure is set together with the seller's tax and legal advisers, modelled economically in variants and disclosed in the teaser. Bidders then calculate on the same basis and offers become comparable.

The most common obstacle

A property company never intended as a sale vehicle: incomplete annual accounts, unresolved shareholder loans, open tax audit items. Much of this can be prepared — but not on the side.

The structuring question should ideally be resolved before buyer outreach begins. Where corporate, financing or tax matters are complex, considerable lead time may be required.