Acquires shares / Acquisition of shares

During the share deal, the buyer buys the seller's own share of business or shares. The transaction is established by mutual agreement.

A share deal is any transaction where a company or an individual buys a share in a company. In this case, the parties enter into a share deal agreement. The stake can be a business share or a share. This is also true when a venture capital investors appears in a company. 

We are also talking about acquisition of shares in the case when the owners of a company sell their shares to each other. In such cases, one owner buys out the other. If the share purchase transaction affects the entire business share or all shares, then we are talking about an acquisition. In the latter case, the buyer buys the entire company.

Mandatory elements of the share deal agreement 

• data about the seller and buyer company, 
• the type of business shares you want to sell, 
• the amount of the part of the business share you want to sell,
• the price of the share involved in the business. 

The agreement must also refer to the laws under which the sale takes place. 

As consideration for the stake, the buyer can offer money, a stake in another business, shares, or any combination thereof.

There are basically two types of shares: voting and non-voting shares. In case of purchase of voting shares, the buyer will have a say in the management of the company. The investor acquires voting rights in proportion to the share. In the case of the purchase of a share that does not provide voting rights, the buyer cannot have a say in the decisions, but will benefit from the results and profits of the target company.

Share deal can be unrestricted or restricted. 

In the case of an unlimited share deal, the buyer pays the purchase price and can freely decide on the future fate of the business share within the regulatory framework. 

In the case of the purchase of a limited share deal, there are conditions that limit the rights of the buyer in certain cases even after the payment of the purchase price. Such a case is, for example, when the parties enter into a "vesting" agreement in the in syndicate agreements during a venture capital investment. In this case, the investor acquires a larger share of ownership from the founder, which the founder can buy back. The possibility of repurchase is conditional, and the founder has not left the company during this period.

In the case of a share deal, it usually changes hands to a proportionate part of the target company during the transaction. However, there are also cases when only certain assets are purchased. There are also examples where the deal affects only one branch of business and not the company as a whole. 

It is typical that before the share deal, the investor initiates a legal due diligence. During the due diligence, they try to reveal all facts and all business risks that can be learned about the target company. The investor can mitigate his own risk mainly by getting to know the history of financial transactions and the composition of the management. Of course, in addition to these, the target company future obligations, existing assets and intellectual property are also taken into account.

As a result of the successful share deal purchase, the investor pays the purchase price. The owner of the sold part of the business share receives this amount. Therefore, this amount does not appear as revenue in the accounting of the target company.