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Share purchase or asset deal?

By Henrietta Remander
Published: 04.10.2022 | Posted in Insights

Recognize the key differences between the different types of acquisitions

Buying all shares of a company through a share purchase or acquiring the business of a company through an asset deal are good ways to grow the business of a company. Each acquisition is different, and whether it is worthwhile to carry out the acquisition as a share purchase or as an asset deal depends, among other things, on the seller’s interests in the transaction and the buyer’s objectives for growing the company’s business.

The reasons behind the seller’s decision of a business acquisition are, for example, an intention to cease business altogether or, alternatively, the seller may seek to sell a separate business area of the company to finance the growth of company’s other business areas. The buyer, on the other hand, might seek growth through an acquisition, for example by acquiring certain intellectual property rights that support its business by buying customer contracts or employees with certain know-how, or alternatively by buying out one of its competitors.

When planning a business acquisition and its implementation, it is good to understand some of the differences between a share purchase and an asset deal.

Parties of the acquisition

In a share purchase the sellers are the shareholders of the acquired company, who receive the purchase price from the buyer. The capital gains possibly accruing to the shareholders from the transaction will be taxed separately for each shareholder. The decision to enter into an acquisition and to sell the shares lies with the shareholders, whose relations and decision-making on the acquisition are often governed in shareholders’ agreements. When the shares of the company that is acquired have transferred to the buyer, the acquired company has become the subsidiary of the buyer.

In an asset deal the seller is the company which owns the business that is acquired. In an asset deal the acquiring company pays the purchase price for the seller company and therefore tax consequences of the transaction are also borne by the selling company. If the entire business of the seller company has not been the subject of the acquisition, the seller company will continue to operate normally in respect of the other business areas it carries on. The business sold in the acquisition will continue to operate as part of the acquiring company’s business.

Due Diligence

As one stage of the acquisition, the buyer carries out a due diligence check on the company or the business to be acquired, to the extent that the buyer wishes, in which the buyer gets to know and to inspect the object of the acquisition. Since due diligence is carried out about the subject of the acquisition, the material covered differs depending on whether the target is the entire shareholding of the company or a specific business area.

In a share purchase, the buyer can inspect all documentation relating to the operations of the company being bought. In an asset deal, the subject of the acquisition is a specific business area with its assets and liabilities, and due diligence is carried out exclusively in relation to this business. The legal due diligence of an asset deal includes, for example, customer contracts relating to the business to be acquired, employment contracts of the personnel transferred in the asset deal, or material relating to the intellectual property rights that are the subject of the transaction.

Read more about preparing for a due diligence process.


In a share purchase, the contracts concluded on behalf of the company remain in force and all contractual liabilities and obligations remain with the company and are transferred to the buyer together with the company. The employment contracts of the employees of the company acquired will continue normally after the deal and the share purchase will have no effect on the employment relationships of the employees.

When preparing a share purchase agreement, it is good to bear in mind that the liabilities and obligations transferred with the company may also include risks that have arisen during the seller’s ownership, but which will only be realised after the sale, leaving the buyer to bear them as the new owner of the company. Such risks are usually identified as part of a careful due diligence process and can then be properly reflected in the preparing of the contract.

An asset deal concerns the company’s business, including, for example, the acquisition of a specific set of customer contracts, a specific intellectual property right, or personnel with specific know-how. When preparing the asset purchase agreement, it is particularly important to define the subject of the acquisition precisely, so that both parties understand which rights and obligations are transferred in the acquisition. The position of employees transferred in an asset deal is protected by the provisions concerning a transfer of a business in the Finnish Employment Contracts Act. An employee is transferred as an “old employee”, and the terms of the employment contract remain same, even the employer changes to be the acquiring company due to the acquisition.

The contracts between companies often include a separate clause on the transfer of contracts. A contract transfer clause may prohibit the transfer of the contract altogether or provide the other party with a right to terminate the contract immediately if the contract is transferred to a third party. The transfer of a contract to a third party may also require the prior written consent of the other party. Since contracts transfer to a third party in asset deals, it is particularly important in the due diligence process of an asset deal to pay attention to the contracts transferred in the acquisition and the terms and conditions contained in them regarding the transfer of the contract.

After the acquisition

Already in the planning stage of an acquisition it is good to think about what will happen to the subject of the acquisition after the acquisition. In an asset deal, the subject of the acquisition automatically becomes part of the acquirer’s business. Even before the actual acquisition takes place, it is important to plan in more detail how the business to be acquired will in practice be integrated into the acquirer’s existing business and how to achieve the most efficient result.

If the acquisition is implemented as a share purchase, it might be economically more viable for the buyer to do a merger, in order to reduce administrative costs in the future. In a merger, the acquired company is merged into the acquiring company and the assets and liabilities of the acquired company are transferred to the acquiring company.


We act as legal advisor to our clients in both domestic and international mergers and acquisitions, including both share purchases and asset deals. We also assist our clients in a wide range of other M&A related matters, such as financing arrangements, generational changes and post-acquisition mergers

Read more about our M&A services.

Contact us

Henrietta Remander
Attorney, Senior Associate, Helsinki +358 40 044 0088

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