Shares, cash or both in company buyout?

Anjistar

Just looking for other people's experience of this.
My husband's business is to be taken over. The company buying, which is quoted, seemingly healthy and pays reasonable dividends, has offered us cash, shares or both. He is a (just) higher rate tax payer, and I pay no tax on low earnings.
Which might be the most tax efficient way of selling the business?

Thank you

Pennywise

Impossible to say without knowing the detail.

Presumably, the "price" is different if it's for cash as opposed to shares so that's one aspect to think about. Acquiring firms often offer a lot more if the deal is done in shares, but you have to be very careful as, of course, the share price may fall. For the seller, giving shares is good, but for the buyer is risky. And that's before even thinking about differences in tax liabilities etc.

You also have to be very wary of just what shares you're being offered as the big firms tend to have complicated structures and different types of shares that give different rights. I once dealt with the aftermath of an independent estate agent who fell for a very attractive share offer from a major High Street estate agent chain to buy his business - he thought he was getting the listed shares of the chain, but he found to his cost that the shares he got in exchange for his business were special shares in a subsidiary that subsequently lost virtually all of their value and he ended up with nothing and had to start again!!

You really need specialist advice from both an accountant and a solicitor who are accustomed to dealing with this kind of transaction, not only to help understand the tax but also to make sure you're not taking on risks you don't realise.

At the end of the day, cash in your pocket is worth a lot more than pieces of paper, so the "paper" deal has to be a lot more worthwhile and low risk to even be considered.

Anjistar

Pennywise wrote: »

Impossible to say without knowing the detail.

Presumably, the "price" is different if it's for cash as opposed to shares so that's one aspect to think about. Acquiring firms often offer a lot more if the deal is done in shares, but you have to be very careful as, of course, the share price may fall. For the seller, giving shares is good, but for the buyer is risky. And that's before even thinking about differences in tax liabilities etc.

You also have to be very wary of just what shares you're being offered as the big firms tend to have complicated structures and different types of shares that give different rights. I once dealt with the aftermath of an independent estate agent who fell for a very attractive share offer from a major High Street estate agent chain to buy his business - he thought he was getting the listed shares of the chain, but he found to his cost that the shares he got in exchange for his business were special shares in a subsidiary that subsequently lost virtually all of their value and he ended up with nothing and had to start again!!

You really need specialist advice from both an accountant and a solicitor who are accustomed to dealing with this kind of transaction, not only to help understand the tax but also to make sure you're not taking on risks you don't realise.

At the end of the day, cash in your pocket is worth a lot more than pieces of paper, so the "paper" deal has to be a lot more worthwhile and low risk to even be considered.

Very helpful, thankyou so much.