Tuesday, June 30, 2020

Keeping it real** on 30 June – the rise and rise of share sales

View Legal blogpost 'Keeping it real** on 30 June – the rise and rise of share sales ' by Matthew Burgess

Given that it is 30 June, it seemed like an appropriate day to focus on the impact of the introduction of the 50% general discount on business succession.

Since its introduction (and certainly with the various evolutions of the small business capital gains tax concessions), we have seen an ever-increasing number of merger and acquisition transactions take place by way of share sale.

Historically, many (if not all) of these transactions would have taken place by way of asset sale.

Due to the difficulties with accessing the various tax concessions when assets are sold by a company, the attractiveness of a share sale has become significant.

The additional issue in this regard can often be that the share sale will legitimately avoid any stamp duty consequence, which is still in some states not the case in relation to a business sale.

One of the key ramifications of the increased number of share sales is that many vendors will actively embark on a 'vendor due diligence' exercise.

Broadly, this involves, sometimes many months before any sale transaction is entered into, the vendor prepares a complete set of due diligence material from its own perspective.

Such an approach can help to significantly reduce the overall costs and risks that might otherwise be associated with a share sale transaction.

Next week’s post will further explore two other key aspects to consider in relation to share sale arrangements.

** for the trainspotters, the title here is keeping it very real by being riffed from a line in the Hannah Montana song ‘Let’s get crazy’.