When buying a business in the UK, one of the first decisions you’ll face is how to structure the purchase. The two most common options are an asset purchase and a share purchase. Each has different implications for liability, tax, and control, so it’s important to understand how they work.
Asset Purchase
In an asset purchase, the buyer acquires selected assets and liabilities of the business, not the company itself.
Pros for Buyers:
- Choose which assets and liabilities to take on.
- Avoid historical debts and hidden liabilities.
- May benefit from new asset depreciation allowances.
Cons for Sellers:
- More complex to unwind.
- May trigger VAT, capital gains, or stamp duty charges on individual assets.
- Employees may automatically transfer under TUPE regulations.
Share Purchase
In a share purchase, the buyer acquires the entire company by purchasing its shares, including all assets, liabilities, and contracts.
Pros for Sellers:
- Cleaner exit – the company remains intact.
- Potential for Business Asset Disposal Relief (formerly Entrepreneurs’ Relief) if qualifying.
Cons for Buyers:
- Inherit all liabilities, including unknown or contingent ones.
- Greater need for thorough due diligence.
- Complex warranties and indemnities needed in legal agreements.
Which Is Right for You?
- Asset purchases are typically preferred by buyers for small businesses or when acquiring just part of a company.
- Share purchases are more common for established businesses with long-term contracts, employees, or brand value the buyer wants to preserve.
Distressed Purchase / Pre-Pack Administration
Buying a business from administration, often in a “pre-pack” deal, where assets are sold to a buyer before formal insolvency proceedings.
Pros:
- Can acquire assets (or the whole business) at a reduced price.
- Opportunity to turn around the business.
Cons:
- Due diligence is limited.
- Reputation risks or legacy issues may follow.
Mergers (or Merger Buy-In)
Two companies combine to form one — often one company absorbs the other through acquisition.
Pros:
- Synergy: combined resources, customers, or IP.
- Can increase market share rapidly.
Cons:
- Can be complex legally and culturally.
- Integration can be disruptive if not managed well.
If you’re ready to explore your options, we’d love to talk.
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Disclaimer: This guide is for general informational purposes only and does not constitute legal, tax, or financial advice. Always seek professional support before entering into a purchase agreement.