Why the structure is the first call

Most acquisition conversations start with a number, the price the seller wants and the price the buyer thinks the company is worth. The number is important. The structure is more important, because it controls who carries what risk into the closing room and who carries what tax bill after.

In a share purchase, the buyer steps into the corporation and inherits the assets, the contracts, the liabilities, the employees, the tax history, and the records. In an asset purchase, the buyer picks specific assets and assumes specific liabilities, leaving the corporation behind with whatever the buyer did not take.

Neither structure is universally right. Which one fits depends on six factors that should be named before the letter of intent is drafted.

Six factors that pick between share and asset

  • Tax exposure. The lifetime capital gains exemption applies to qualifying small business corporation shares. Asset sales rarely qualify.
  • Employee continuity. Share purchases preserve employment; asset purchases trigger a termination and rehire that can carry severance exposure.
  • Liability transfer. In a share purchase, the buyer inherits everything the corporation has ever owed. Asset purchases let the buyer leave undisclosed liabilities behind.
  • Records and history. A buyer of shares inherits the minute book, the share register, and the corporate history as they are. A buyer of assets does not.
  • Permits and contracts. Some permits and contracts are tied to the corporation and transfer with a share sale. Asset sales often require renegotiation with the counterparty.
  • Closing complexity. Share purchases close on one transfer of ownership. Asset purchases require an itemised assignment of each asset, often with separate closing mechanics for each.

What DRG does at this stage

DRG starts with the structure question before the letter of intent is drafted. The output is a one-page note naming the structure that fits, the criteria that pick between options, and the work that follows. The letter of intent is drafted against that note, not against an assumption.

The cost of revisiting the structure question after due diligence opens is high. The cost of answering it once at the start is low.