Vente d’actions ou une vente d’actifs? Les avantages et incovénients

Share Sale or Asset Sale? The Pros and Cons

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When selling a business, one of the critical choices for both sellers and buyers is whether to pursue a stock sale or an asset sale. Both options can have significant financial and tax implications, influencing liability management, contractual relationships, and many other aspects of the transaction. Let’s explore the key distinctions, tax implications, and strategies for each approach to help guide sellers and buyers.

Understanding the Basics: Selling Stocks vs. Selling Assets

In a stock sale, the buyer directly purchases the shares of the company, thereby taking ownership of the entity itself with all of its existing assets, liabilities, and contracts. Conversely, in an asset sale, the buyer acquires only the specific assets of the company, such as inventory, goodwill, equipment, or intellectual property, but does not directly assume any liabilities.

The tax benefits and impacts of selling shares

For the seller, selling shares is often tax-efficient. In many jurisdictions, including Canada, a capital gains exemption may apply to shares in certain SMEs, which can significantly reduce the tax payable. In addition, selling shares simplifies the process because the corporate structure remains intact. Contracts, licenses and other agreements continue under the new ownership without requiring renegotiation.

For the buyer, selling shares can involve certain risks. By purchasing the shares, the buyer also accepts all potential liabilities of the company, which may include debts or potential litigation. Thorough due diligence is therefore essential to limit the risks associated with these liabilities. Furthermore, a sale of shares does not offer immediate tax benefits, as the buyer cannot amortize the acquired shares in the same way as tangible or intangible assets.

The tax benefits and impacts of an asset sale

For the buyer, asset sales provide greater control over the items acquired. The buyer can choose only the assets it wishes to acquire, thereby limiting exposure to unwanted liabilities. This type of transaction also opens the door to attractive tax deductions, as the assets can often be depreciated over several years, thereby reducing the tax payable.

For the seller, however, there are tax disadvantages to asset sales. Unlike stock sales, asset sales can be taxed immediately based on the gains made on each asset, and do not benefit from the capital gains exemption. In addition, the process is often more administratively complex, as each asset may need to be transferred individually and associated contracts, licenses, and permits renegotiated, which can result in additional costs and delays.

Impact of the two options on stakeholders

Stock or asset sale choices also affect employees, customers, and suppliers of the business being sold. In a stock sale, employees typically keep their jobs because the business structure is not changed. In an asset sale, the buyer may decide to take over employment contracts, but they may also choose to renegotiate them or not retain them.

For customers and suppliers, a share sale implies continuity of relationships, as existing contracts remain valid. In contrast, an asset sale may require renegotiating supplier contracts and rebuilding customer relationships, which can pose challenges in terms of business continuity and customer satisfaction.

Transactional complexity and associated costs

A share sale is often simpler for the seller because there is no need to transfer each asset individually or renegotiate contracts. However, the buyer will typically incur costs for more in-depth due diligence to properly assess liabilities. In an asset sale, each asset must be transferred individually, which can result in significant legal and administrative costs. In addition, the process may require obtaining third-party consents to transfer certain contracts.

Sectoral examples to illustrate the differences

Transactions can vary by industry. For example, in a technology company, the sale of assets may include specific patents, software and databases, providing selective control of critical assets without committing to the associated liabilities. In the manufacturing sector, where equipment and inventory are often more important than patents, the sale of shares would allow for a transfer of all assets and liabilities, facilitating business continuity and immediate resumption of production.

Risk mitigation strategies

Protection strategies can be incorporated into the transaction to reduce risks for both parties. In a stock sale, the buyer may require non-compete and indemnity clauses to protect against future risks or unknown liabilities. Specific insurance policies can also cover liabilities that arise after the transaction. In an asset sale, the seller may require collateral clauses to minimize the costs or risks associated with the transfer of specific assets.

Summary of consideration points for sellers and buyers

Before choosing between selling assets and selling shares, it is useful to ask yourself some key questions. For example:

What level of risk is the buyer willing to accept in terms of existing liabilities?

What are the buyer's critical assets, and how can they be transferred effectively?

Is the seller seeking to optimize his tax treatment through the exemption of capital gains?

Expert insights and practical advice

Expert advice in tax, commercial law or M&A can be invaluable in maximizing the value of the transaction. In addition, preparatory steps can help sellers structure their assets and identify liabilities to be covered, while buyers benefit from a thorough review to fully understand the issues of each option. Visit the Collaborative Solutions section to learn more.

Conclusion: Adapt the strategy to the specific situation

The choices between a stock sale and an asset sale can seem complex, but with a careful assessment of each party’s situation and priorities, it is possible to find the most mutually beneficial approach. Before making a decision, consulting a financial or tax expert can help assess the precise impacts of the transaction, anticipate challenges, and ensure a smooth transition for all parties.