Mergers and acquisitions (M&A) processes are complex operations that require careful analysis and planning. One of the key choices facing companies involved in such transactions is the decision between the two main forms of transaction: Share Deal or Asset Deal. Here are the main differences between the two approaches.
Share Deal (Share purchase transaction)
In a Share Deal, the transaction involves the purchase of shares in the target company. This means that the buyer becomes the new owner of the existing company in its entirety, along with its assets, liabilities, and business history. In practice, all rights and obligations related to the ownership of shares are transferred to the new owner.
The main advantages of a Share Deal are the continuation of business continuity and the inheritance of all the company's assets, contracts, and liabilities. Share Deal can be more time-efficient because it does not require the transfer of individual assets.
Advantages of Share Deal:
1. Business Continuity: The target company retains its identity, which usually helps to continue business operations.
2. Avoiding Transfer of Assets and Liabilities: Assets and liabilities automatically transfer to the buyer, minimizing the need to transfer individual assets.
3. Ease of Transition of Control: The acquisition process is usually simpler, as it only requires the purchase of a block of shares.
However, Share Deal also has its drawbacks. The new owner inherits all potential liabilities and risks associated with the company's past, including legal or tax liabilities. In addition, Share Deal requires shareholder approvals and there may be difficulties related to different investor expectations.
Disadvantages of Share Deal:
1. Liabilities and Risks: The buyer inherits all liabilities and risks of the target company.
2. Lack of Asset Selectivity: The buyer cannot selectively choose the assets it wants to acquire.
Asset Deal (The acquisition of the company's assets)
In an Asset Deal, the transaction involves the purchase of specific assets of the company, not the company itself. The buyer selects specific assets to purchase, thus avoiding the inheritance of all liabilities and risks associated with the company's past.
The main advantages of an Asset Deal are the ability to selectively purchase assets, avoiding the inheritance of hidden liabilities and greater flexibility in structuring the deal. In addition, this type of transaction may be more attractive to the buyer from the standpoint of limiting legal liability.
Advantages of Asset Deal:
1. Asset Selectivity: The buyer has control over the selection of the specific assets it wants to acquire.
2. Avoidance of Liabilities: The buyer does not inherit all the liabilities and debts of the target company.
3. Ease of Asset Valuation: The value of assets is usually easier to estimate, making the valuation process easier.
A disadvantage of Asset Deal may be the need to transfer many individual assets, which may take more time and generate additional costs. In addition, the selling company may be required to terminate employees or restructure prior to the transaction.
Disadvantages of Asset Deal:
1. Business Breakdown: The transaction often requires the transfer of individual assets, which can lead to interruptions in business operations.
2. Consent to Owner Changes: For some deals, consent to change ownership is required, which can complicate the process.
Conclusion
The choice between a Share Deal and an Asset Deal depends on several factors, such as the company's structure, risks, business strategy and investor preferences. Each option has its advantages and disadvantages, and a thorough analysis of the situation is key to making the right decision. Regardless of the choice, conducting due diligence is a key element to minimize risk and ensure a successful M&A transaction.
The use of Virtual Data Rooms in M&A transactions
The role of virtual data rooms (VDRs) in mergers and acquisitions (M&A) transactions is crucial to ensure the security, confidentiality and efficiency of the transaction process. Here are some of the key tasks and functions that a VDR performs in M&A transactions:
1. Secure document storage: The VDR enables the secure storage and sharing of a large number of documents related to the transaction, such as contracts, financial documents, legal reports, intellectual property, etc.
2. Access control: The VDR enables precise control of access to documents, which is extremely important in M&A transactions where confidentiality of information is crucial. It makes it possible to ensure that only authorised parties have access to specific documents.
3. Activity monitoring: The VDR provides tools to monitor user activity, allowing you to track who has accessed specific documents and when. This provides an additional layer of security and auditing.
4. Easy document search and management: With its advanced search and indexing features, VDR makes it easy to quickly find the documents you need in a large number of files. In addition, it enables easy document management, including adding, deleting and updating files.
5. Collaboration and communication: the VDR enables effective collaboration between the various parties involved in an M&A transaction. It enables the rapid exchange of information, comments and feedback, which can speed up the decision-making process.
6. Due diligence: the VDR is a key tool for the due diligence process, which is an indispensable part of an M&A transaction. It enables potential investors to thoroughly examine the documents of the target company to assess the risk and potential of the transaction.
In summary, VDRs play a key role in ensuring the security, confidentiality and efficiency of the transaction process in M&A transactions, enabling the parties involved to effectively manage documents and collaborate.
About us
DealDone is a specialised company offering high quality information and data security products. We offer digitisation services and software in the field of modern technologies for the circulation of confidential information, classified information, sensitive data and the digitisation, security, encryption and sharing of data and documents inside and outside the organisation.
For more than 10 years, DealDone has specialised in providing solutions related to the digitisation, archiving and sharing of documents in the form of Document Management System (DMS) or Virtual Data Room (VDR). The company has independently developed and marketed the SECUDO VDR system. SECUDO is a platform for secure digitisation, archiving, sharing and processing of corporate documents and data offered in the cloud, in a Software-as-a-service model, for business customers.
DealDone also owns the portals www.platformainwestora.pl and www.sprzedamfirme.com, through which it supports transaction processes related to selling a company, raising capital and finding investors for a project.