Compare the four primary deal structures used in digital business transactions. Understand the tax treatment, risk profile, and control implications for buyers and sellers.
| Criteria | Asset Sale | Share Sale | Earnout | Equity Rollover |
|---|---|---|---|---|
| Structure Overview | Buyer acquires specific assets and liabilities. Entity remains with seller. | Buyer acquires 100% of shares. Entity transfers with all assets and liabilities. | Portion of price paid post-close, contingent on hitting agreed milestones. | Seller retains a minority equity stake in the business post-close. |
| Seller Tax Treatment | Varies. Assets taxed at ordinary income rates in many jurisdictions. | Typically CGT treatment. More favourable in most jurisdictions. | Deferred income. Tax timing depends on when payments are received. | Partial CGT event at close. Remaining stake taxed on future exit. |
| Buyer Tax Treatment | Step-up in asset basis. Depreciation and amortisation deductions available. | No step-up in basis. Inherits historical tax position of the entity. | Payments may be deductible as they are made. Reduces upfront capital outlay. | Partial acquisition. Tax treatment depends on jurisdiction and structure. |
| Liability Transfer | Buyer selects which liabilities to assume. Historical liabilities stay with seller. | All liabilities transfer with the entity, including undisclosed and contingent. | Depends on underlying structure (asset or share). Earnout is a payment mechanism, not a structure. | Liabilities transfer with entity. Seller retains exposure through retained equity. |
| Complexity / Legal Cost | Moderate. Requires individual asset transfer documentation. | Lower. Single share transfer. Simpler for digital businesses with clean cap tables. | High. Milestone definitions, audit rights, and dispute mechanisms add significant legal complexity. | High. Shareholder agreements, drag-along, tag-along, and governance provisions required. |
| Seller Control Post-Close | None. Full exit. Seller has no ongoing role unless contracted separately. | None. Full exit. Seller may be retained as employee or consultant under separate agreement. | Limited. Seller has economic interest in outcomes but buyer controls operations. | Retained. Seller holds board seat or observer rights proportional to equity retained. |
| Valuation Gap Resolution | Limited. Price is fixed at close. No mechanism to bridge forward-looking disagreements. | Limited. Same as asset sale. Price adjustments via locked box or completion accounts only. | Excellent. Directly bridges gaps by tying future payments to actual performance. | Strong. Seller participates in future upside, reducing pressure on upfront price. |
| Common Use Cases | Distressed sales, IP acquisitions, partial business carve-outs, asset-heavy businesses. | Clean digital businesses, SaaS, fintech, content platforms with simple cap tables. | High-growth businesses, founder-led companies, deals with forward revenue uncertainty. | PE-backed recaps, management buyouts, strategic partnerships, second-bite transactions. |
| Typical Timeframe to Close | 6 to 12 weeks (plus asset transfer logistics) | 4 to 10 weeks (simpler documentation) | 8 to 16 weeks (milestone negotiation adds time) | 10 to 20 weeks (governance documentation) |
The buyer acquires specific assets (domain, code, customer lists, IP, contracts) rather than the legal entity. The seller retains the corporate shell and any liabilities not explicitly transferred.
The buyer acquires 100% of the shares in the operating entity. All assets, contracts, employees, and liabilities transfer automatically with the entity. Most common structure for clean digital businesses.
A portion of the purchase price is deferred and paid based on post-close performance. Used to bridge valuation gaps where buyer and seller disagree on forward projections. Can be layered on top of an asset or share sale.
The seller receives cash for a majority of their equity but retains a minority stake in the business post-close. Common in PE-backed transactions where the buyer wants the founder to remain aligned with growth.
Model the numbers behind each option with the Earnout Modeller and the Capital Stack Builder, or compare tax and regulatory settings across markets in the Jurisdiction Comparison Tool.
This comparison is for general information purposes only. Tax treatment, legal implications, and structural suitability vary significantly by jurisdiction, deal size, and specific circumstances. This does not constitute legal, financial, or tax advice. Always engage qualified advisors before structuring a transaction.
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