Share Deal in Real Estate Transaction

Generally, the term Share Deal

In general, the term share deal refers to the sale of shares in a company. At first, the legal form of the company does not play a role. For example, they may be shares of a limited liability company or shares. When a company is sold, all the assets of that company are also transferred to the buyer. As a real estate agent who specializes in the brokerage of investment properties, share deals are part of our day-to-day business. 

In many cases, the ownership and management of real estate is the most important business area of a company. The real estate then represents almost all of the company’s fixed assets. Examples of this are hotels or housing associations. In such cases, instead of acquiring the real estate, the acquisition of a majority of the company’s shares may be considered.


Share Deal vs. Asset Deal Differences

Let us stick to the example of the housing stock of a housing association. In principle, there are two ways to purchase real estate. In the case of Share Deal in Real Estate, the buyer does not acquire the property, but up to 100 percent of the shares in the company. (The fact that it is often cheaper to take over a maximum of 95 percent of the shares is a legal detail that should not be addressed here.) 

In the case of an asset deal, however, the buyer only acquires the properties themselves. A formal difference between the two variants is immediately noticeable. In the asset deal, the housing company is the seller, in the share deal its shareholders are the sellers. This difference alone may cause the tax valuation of both variants to be significantly different. It is conceivable, for example, that the housing association is based in Germany, while the shareholders are corporations based abroad.

Real estate brokerage also includes share deals and asset deals

As an investment brokerspecializing in real estate purchase severer purchases and commercial real estate sales, we are very familiar with the details of share deals and asset deals. For us, it is the rule rather than the exception that the owners of the objects we mediate are not natural persons, but companies with different legal forms. Therefore, it is also our task to inform our clients with regard to the tax and other legal aspects of both variants of the real estate purchase or real estate sale or to establish contact with specialists.

What should I consider in the Share Deal?

At first glance, the Share Deal impresses with its simplicity of contract design. The content of the contract is essentially that the buyer takes over the entire company or the majority of the company shares. The problem with this variant is that the new owner also assumes all obligations. This applies not only to any debts of the company, but also to all contracts with suppliers and other business partners. 

As can currently be seen from the example of one of the largest German companies, the new owner also enters into potentially very expensive litigation by the previous owner. A share deal must therefore be preceded by a detailed examination of the financial, legal and tax risks. This check is called due diligence. We also carry out these for our clients, if necessary with the assistance of appropriate external specialists.

So the asset deal is the better option?

The asset deal actually avoids many of the risks of the share deal, but also has drawbacks. If the acquired assets are real estate, an asset deal will pay the real estate transfer tax. Their amount depends on the state and can be up to 6.5 percent. In addition, there are many details to consider in an asset deal. Only the assets that are explicitly mentioned in the contract are transferred. Those who are careless here, for example, can buy a hotel, but not the right to continue it under their previous name. This right may be an intangible asset of its own, which must be explicitly listed in the contract.

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