Yes, it is true that you can cover these with tax warranties, but it’s far easier to avoid this with an asset sale. The majority of very small acquisitions are carried out as asset sales in the transactions that we work on because they are simpler and cheaper. Notwithstanding this, the reason that share sales are popular is the tax treatment from the vendor's point of view. In a simple way, they simply exit the business. The vendors agree on a price for the shares. They resign and you take over removing what is agreed. The normal process, if you are buying the shares or all the assets, is that you use a special-purpose vehicle and potentially a holding company. A special-purpose vehicle (SPV) is just a new company formed for acquiring the assets and liabilities on the sale, all the shares in a share sale. The reason I will advocate using an SPV is to manage the risk if all goes wrong. The liabilities for the acquisition will be held in the SPV and if you have bought a complete disaster, and unfortunately that is more common than you might think, you can limit your liability via the company. I’m sure if you have reviewed the chapters in this book, the term deferred consideration is mentioned. That is a position where you pay for the assets, or the shares, over a period of time in the future. The term vendor finance is also used. This is particularly common and useful, especially when you cannot agree on the share price. I will give you one very true life example: Typically, in the construction industry, small construction companies are worth, in my opinion, very little. The vendor believes there will be a whole stream of work coming to that company, but contractually all the acquirer gets is the contract that is signed on the date of the sale. There is a massive gap in expectations and to breach that gap you might agree to some sort of deferred consideration that is contingent
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