By Bruce McGechan, CVA — Fealty Business Valuations · Last reviewed 26 August 2026
A share sale transfers the company itself — shares, contracts, liabilities and tax history. An asset sale transfers only nominated assets and goodwill, leaving the company shell with the seller.
You get two offers for the same business. One buys your shares, the other buys the assets. The two dollar figures won’t match, because they’re measuring different things.
Read the headlines side by side and you’ll compare the wrong numbers. To compare them properly you have to convert one into the other.
A share sale hands over the company itself. The buyer steps into every asset, every liability and every contract, the known ones and the unknown ones. The seller usually gets capital treatment and a clean exit.
An asset sale is narrower. The buyer’s own company takes the trading assets and the goodwill, has the contracts it wants assigned across, and leaves the rest behind. The company shell, and anything lurking in it, stays with the seller.
That’s why the buyer’s lawyer tends to prefer an asset deal: it walls off unknown liabilities. The vendor’s lawyer usually wants the opposite, because a share sale is cleaner for the seller and generally on capital account.
Take a small services company with a 31 March balance date. It’s profitable (rounded, $000):
| Year end 31 March | FY24 | FY25 | FY26 forecast |
|---|---|---|---|
| Revenue | 2,300 | 2,500 | 2,600 |
| Net profit after tax | 360 | 400 | 420 |
On those earnings the business is valued at $3M for 100% of the shares. That $3M is the equity value: the price for the company as a going concern, lock, stock and barrel.
Here’s the balance sheet behind it:
| Balance sheet | $ |
|---|---|
| Cash | 700,000 |
| Trade debtors | 450,000 |
| Stock / work in progress | 250,000 |
| Fixed assets (at market value) | 600,000 |
| Total assets | 2,000,000 |
| Trade creditors and accruals | 300,000 |
| Bank loan | 500,000 |
| Tax payable | 200,000 |
| Total liabilities | 1,000,000 |
| Net tangible assets | 1,000,000 |
Net tangible assets are $1,000,000. The equity value is $3M. The buyer is paying $2,000,000 over the tangible asset base, and the gap is the goodwill: the value of the earnings the assets produce, over and above the assets themselves.
The goodwill falls straight out of the two figures above:
Goodwill = equity value − net tangible assets = $3,000,000 − $1,000,000 = $2,000,000
Now split the balance sheet the way an asset deal splits it. The buyer takes the goodwill and the operating tangible assets it needs to trade (the fixed assets and the stock) and assumes none of the liabilities. The seller keeps the cash and the debtors and settles the liabilities out of the company.
| Asset sale split | Buyer takes | Seller keeps |
|---|---|---|
| Goodwill | 2,000,000 | |
| Fixed assets | 600,000 | |
| Stock / work in progress | 250,000 | |
| Cash | 700,000 | |
| Trade debtors | 450,000 | |
| Liabilities (settled by seller) | (1,000,000) | |
| Subtotal | 2,850,000 | 150,000 |
So the asset price is $2,850,000, and the seller is left with $150,000 of net assets sitting in the company. Add the two columns and you’re back to $3,000,000, the same equity value as the share deal.
That’s the conversion. A $3M share sale is a $2,850,000 asset sale plus $150,000 of net assets the seller retains.
In a share sale the $3M goes straight to you as the shareholder, generally on capital account. In an asset sale the $2,850,000 is paid to the company, not to you. To get it into your own hands you need a second step, a dividend or a liquidation, and that step carries its own tax. The $150,000 you kept in the company has the same problem.
An asset sale also leaves you holding the shell afterwards. That means the employee entitlements and any redundancy exposure, the lease make-good, the warranty tail and the wind-down are all still yours to deal with.
Tax changes the answer. Get advice before you sign. The points below are directional, not a tax opinion.
- Where the money lands. Asset proceeds are paid to the company and need a second step to reach you, with tax on that step. Share proceeds reach you directly, usually on capital account. That gap often outweighs the headline difference between the two prices.
- Purchase price allocation. For asset sales, the Income Tax Act 2007 requires buyer and seller to allocate the price across asset classes on a consistent basis. Get this wrong and the two sides file inconsistent positions.
- Depreciation recovery and GST. Selling fixed assets above their tax book value triggers depreciation recovery income. A going-concern asset sale can usually be zero-rated for GST, but only if it’s documented correctly.
- Talk to your accountant and lawyer before you choose a structure.
The unknown-liability argument makes asset deals sound like the safe default. Plenty of deals are still share deals, for good reason.
Contracts that can’t be assigned, licences, consents and accreditations, leases, registered IP, and employee continuity all point towards a share sale. And unknown liabilities don’t only get managed by structure. Warranties, indemnities, retentions and warranty-and-indemnity insurance may handle them inside a share deal too.
A share price and an asset price for the same business are two views of the same value, not two different values. Convert one into the other before you compare them, and then look past the totals to where the money actually ends up and what tax it picks up on the way.
About the Author
Bruce McGechan, CVA — Fealty Business Valuations
Bruce McGechan is a Certified Valuation Analyst (CVA), credentialled by the National Association of Certified Valuators and Analysts (NACVA), and a Certified M&A Advisor. He has valued 90 privately held New Zealand businesses across many sectors. Based in Palmerston North and working nationwide, he prepares independent valuations for shareholder buyouts, succession and pre-sale planning, and relationship property and shareholder disputes. His work applies NACVA professional standards to New Zealand conditions — local transaction evidence, NZ tax settings, and the thin-market realities of owner-operated and mid-market companies.
Talk to Bruce: 021-245-8881