Asset Sale

In an asset sale, the buyer will acquire all or only some assets of the company. If there are liabilities attached to the asset, the buyer will generally assume them. After the asset sale, the company becomes a ‘shell’ and will usually be dissolved. Assets may include intellectual property rights, client records, property/premises of the business, goodwill, contracts, stock, machinery and IT systems, among other things.

Benefits of an asset sale include a shorter due diligence process with less time and expense involved in negotiating warranties and indemnities, the directors can sell the assets and in turn the business with little involvement from shareholders and the buyer can decide what assets to sell.

The drawbacks to an asset sale are that contracts will not transfer automatically and will have to be individually negotiated with suppliers and clients, any property will transfer separately with stamp duty payable, the tax liability can be unfavourable and there is less privacy as third parties will need to be contacted regarding closure of the company where the sale impacts their interests. Note that TUPE will apply to staff so this is an additional consideration to factor in.