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Should we acquire the shares or just the assets of the target company?
Page 52
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Usually the shareholders of the target company wish to dispose of their shares in order to take advantage of taper relief and substantial shareholding exemption from capital gains tax. From the buyer's perspective there are sometimes tax losses in the target company that can be utilised: and there are issues such as stamp duty which could be significant if the assets include land or buildings with substantial value.
However, one major consideration in the acquisition of shares in the target company is that the buyer would normally betaking on all the liabilities of the company and it is essential that a very thorough due diligence exercise be undertaken. This is why it can often be attractive to a buyer to try to cherry-pick certain assets and leave behind the liabilities in the company.
However, there may be some liabilities which cannot be avoided — in particular, if the 'essence of business' is being acquired, the Transfer of Undertakings (Protection of Employment) Regulations (TUPE) will apply to the company's employees.