Without exception, the key asset and rightful focus in any financial services asset disposal are the clients (or rather, the opportunity to service those clients). Having decided that it’s time to sell, timing, price and the suitability of the buyer all receive top priority. Scant regard (if any) is given to the sale structure until a professional adviser (usually a lawyer or accountant) raises the issue with the parties.
Selling the shares in a company is attractive as the seller may avail themselves of substantial tax savings (up to 50 per cent) via the small business CGT concessions. Such discounts are not usually available to the disposal of business assets (sold in isolation or as a going concern).
For the buyer, the key difference between shares and assets is the additional “baggage” that comes with a company. When you buy assets (such as a client list) that’s exactly what you get – the assets on the list. Other items that make up the business (like employees, intellectual property and leases) may or may not be included as part of the sale. When you buy a company, you get everything – good and bad – that is attached to that entity. Without doing comprehensive due diligence, you’re not to know whether it has unpaid tax or employee liabilities or whether it has complied with the terms of its licence.
It’s a substantial risk and one that the buyer will need to weigh against the opportunity/price being offered by the seller.
