The most important facts at a glance
- Structural decision with far-reaching consequences: The choice between an asset deal and a share deal has a significant impact on liability risks, transferability of intellectual property rights and data protection obligations in corporate transactions.
- IT-specific risks require specialist expertise: Unresolved software licenses, open source compliance and GDPR violations can lead to massive liability risks, particularly for technology companies, which require specialized legal support.
- Customized protection by IT legal experts: Expert due diligence and industry-specific contract drafting can protect intangible assets and minimize hidden risks in the digital sector.
When planning a company takeover or sale, a fundamental decision has to be made right at the start: should the transaction be structured as an asset deal or a share deal? This decision has far-reaching legal, tax and practical consequences - especially for companies whose most valuable assets are in the form of software, intellectual property and data.
An asset purchase agreement (APA) regulates the acquisition of individual assets of a company, while a share purchase agreement (SPA) documents the purchase of company shares. Both forms of transaction have their specific advantages and disadvantages, which can be seen from it-legal perspective are of particular relevance.
Fundamental differences: asset deal vs. share deal
The asset deal - acquisition of selected assets
In an asset deal, the buyer acquires selected assets of a company. These can be of a tangible nature (hardware, office equipment) or - particularly relevant for IT companies - of an intangible nature (software, patents, brands, customer data). The legal framework for this is an asset purchase agreement that precisely defines the assets to be transferred.
Advantages: The asset deal offers the opportunity to selectively acquire assets without legacy liabilities and enables the targeted selection of specific business areas. Buyers can thus avoid liability for past liabilities and renegotiate conditions by concluding new contracts.
Challenges: This type of transaction requires the individual transfer of each asset, which can be complex with a large number of assets. In addition, the consent of contractual partners is often required for contract transfers, and new license agreements may be required for software.
The share deal - acquisition of company shares
In a share deal, the acquirer buys the shares of the target company. The company itself remains the legal entity; only the ownership structure changes. The legal basis is a share purchase agreement that regulates the transfer of the company shares.
Advantages: The share deal is characterized by the automatic transfer of all contracts, licenses and permits, which preserves the legal continuity of the company. An individual transfer of assets is not necessary and existing customer relationships remain completely unaffected.
Challenges: In this type of transaction, the buyer assumes all - even unknown - risks and liabilities, including the entire company history. Data protection and compliance risks are transferred in full, which is why particularly careful due diligence is essential.
IT-specific challenges in corporate transactions
IT companies face particular challenges in M&A transactions that go beyond traditional company acquisitions. The value of a technology company often lies primarily in its intangible assets - from proprietary software and patents to data and technical expertise. These special features must be taken into account when deciding between asset and share deals.
1. due diligence & contract review
One of the core tasks of legal support is the thorough examination of all technical and legal aspects of the target company. The following areas are particularly relevant here:
IT contract analysis
For IT companies, complex contract networks often form the backbone of the business model. These include software licenses, maintenance contracts, cloud services, SaaS contracts and IT service agreements. A specialist IT lawyer examines the transferability of existing contracts, which is particularly relevant in asset deals, as well as change of control clauses that can be triggered in share deals. In addition, termination rights and periods, liability and warranty provisions as well as special conditions and individual agreements are closely scrutinized.
Intellectual property (IP)
Ensuring that all software and IT-related rights can be properly transferred or are held by the company is essential. An experienced IT lawyer checks the copyrights to software developed in-house and analyzes IP rights when commissioning external developers. Inventions and patents, trademark protection and domain rights as well as know-how protection and non-disclosure agreements are also subjected to a thorough review.
Open source compliance
An often underestimated risk lies in the use of open source software. As part of the legal audit, open source components used are identified and checked for license compliance, with particular attention paid to copyleft licenses such as GPL GNU. In addition, a risk assessment is carried out with regard to possible license violations and compliance strategies are developed for the period after the takeover.
2. data protection & GDPR compliance
Data protection poses a particular challenge in M&A transactions in the IT sector:
Data transmission & use
The GDPR sets clear limits for the transfer and further processing of personal data. Our audit covers the legal basis for data processing after the takeover, with particular attention paid to the differences between asset deals and share deals. We also clarify the information obligations towards data subjects and review the necessary consents and their documentation.
AV contracts (order processing)
Existing data processing agreements must be thoroughly reviewed as part of the M&A transaction. Changes to the corporate structure often require an adjustment or renegotiation, and the responsibilities as client or processor must be redefined. We pay particular attention to ensuring GDPR compliance in the transition phase.
Reporting obligations & risks
Identifying existing or potential data protection breaches is crucial for a successful M&A transaction. We review the company's compliance history and evaluate past data protection incidents to analyze potential risks of fines. We also examine the documentation of data protection impact assessments to obtain a comprehensive picture of the data protection situation.
3. technical infrastructure & IT security
IT security is another critical factor that must be taken into account in M&A transactions:
IT security standards
Compliance with industry-standard security standards should be comprehensively verified as part of an M&A transaction. We review existing certifications and analyze the implemented security measures in detail. We also assess the quality of the incident response plan and review the effectiveness of contingency plans and backup strategies.
Cybersecurity risks
Potential vulnerabilities in IT systems can lead to significant problems after the acquisition and should therefore be thoroughly investigated. As part of our due diligence, we identify past security incidents and assess the target company's network security. In addition, we analyze access rights and controls and check the system for existing security gaps in order to identify potential risks at an early stage.
4. license management & software usage rights
The handling of software licenses differs fundamentally between asset deals and share deals:
Rights of use for share vs. asset deal
In a share deal, all rights are automatically transferred with the company, whereas in an asset deal, new licenses often have to be acquired or existing ones transferred. Our legal advice includes a detailed examination of the transferability of software licenses and the identification of non-transferable licenses. We determine the expected costs for new licenses or license transfers and develop tailor-made solutions for dealing with cloud and SaaS solutions as part of the transaction.
Vendor lock-in & third-party dependency
Dependence on certain providers can make the acquisition of an IT company considerably more difficult and should therefore be carefully analyzed. Our experts examine critical IT systems and their vendor dependency and assess the potential costs of necessary system migrations. We also examine long-term contractual commitments and identify key suppliers for IT operations in order to identify potential risks and costs at an early stage.
5. contract design & liability issues
Drafting the contract is crucial to minimize risks and ensure a smooth takeover:
IT-specific guarantees & exemptions
The purchaser of a company should be protected against potential legacy issues by means of suitable contractual provisions. We develop tailor-made guarantees for the legality of software licenses and formulate effective assurances for GDPR compliance. In addition, we develop warranties for IT security and indemnification clauses for unresolved rights to self-developed software as well as specific guarantees for open source compliance that take into account the special risks of IT companies.
Transition & migration agreements
Technical transitional solutions are often required when IT systems or data need to be migrated as part of the transaction. We design tailor-made Transitional Service Agreements (TSAs) for the transition phase and develop detailed regulations for data migration. We also draw up contractual agreements for the temporary use of IT infrastructure and formulate clear regulations for support during system integration to ensure a smooth transition.
The optimal transaction structure for companies
The decision between an asset deal and a share deal depends on numerous factors. The following aspects are particularly relevant for IT companies:
When is an asset deal advantageous?
An asset deal can be particularly advantageous for companies if certain conditions are met. This form of transaction is suitable if only certain business areas or technologies are to be acquired or the target company has significant compliance risks. The asset deal is also advisable if the software architecture is independent and can be easily delineated, if the aim is to renegotiate license and customer contracts or if there are tax reasons for acquiring individual assets.
When is a share deal advantageous?
A share deal can be particularly useful for companies in specific circumstances. This form of transaction is recommended if the target company has numerous complex contracts that are difficult to transfer or if a smooth continuation of all business relationships is desired. A share deal also makes sense if important licenses, permits or certifications are tied to the company, the IT infrastructure is closely interwoven with other parts of the company or the due diligence has not uncovered any critical risks.
The path to a successful transaction
The success of an M&A transaction depends to a large extent on careful preparation and expert support. The following steps should be taken into account:
1. early legal advice
The early involvement of specialized IT legal experts can be decisive in identifying the optimal transaction structure and recognizing potential risks in good time.
2. comprehensive due diligence
A thorough examination of all relevant technical, legal and economic aspects forms the basis for well-founded decisions and the identification of risks.
3. customized contract design
The structure of the asset purchase agreement or share purchase agreement should take into account the specific risks and characteristics of the IT company and provide for appropriate protective measures.
4. structured transition planning
Careful planning of the transition phase is crucial to avoid business interruptions and to facilitate the integration of IT systems and processes.
5. post-closing compliance
Once the transaction has been completed, ensuring legal compliance in areas such as data protection, IT security and license management is crucial for long-term success.
Specialized legal advice as a success factor
The decision between an asset purchase agreement and a share purchase agreement has far-reaching consequences for companies. The particular challenges in the areas of software licenses, intellectual property, data protection and IT security require specialized legal support.
At SITTIG LAW, we combine comprehensive expertise in M&A with in-depth knowledge of IT law. We support you in structuring the transaction, conducting IT-specific due diligence and drafting tailor-made contracts that take your specific needs and risks into account.
Contact us for a consultation in which we can analyze your individual situation and provide an initial outlook on the optimal transaction structure.
Frequently asked questions
In an asset deal, individual assets of a company are acquired, while in a share deal the company shares are transferred. The asset deal enables a selective takeover without legacy burdens, while the share deal preserves the legal continuity of the company.
The transfer requires careful examination of the license conditions, as many licenses contain restrictions regarding their transferability. The consent of the licensor is often required or new licenses must be acquired.
In a share deal, the data controller remains the same, whereas in an asset deal there is a change, which requires new legal bases. In both cases, information obligations towards data subjects may arise.
IT-specific risks can be covered by comprehensive guarantees for software licenses and data protection as well as indemnification clauses for known or unknown risks.
The due diligence of IT companies requires a technical evaluation of software licensing and IT security in addition to traditional legal audits. Analyzing the intellectual property of software developed in-house and evaluating data protection compliance and technical dependencies are particularly challenging.
Open source compliance is an often underestimated risk factor, as non-compliant use can lead to considerable legal consequences. Careful examination of the open source components used and their license conditions is therefore essential for a successful transaction.
In the case of a share deal, operational continuity is maintained, whereas an asset deal requires a more complex transition. In both cases, transitional service agreements are often necessary to regulate temporary access to IT systems, support and data.
In international transactions, country-specific IT legal requirements such as different data protection laws and software licensing regulations must be taken into account. Legal support should therefore include expertise in the relevant jurisdictions in order to ensure that cross-border data transfers and international software licensing issues are legally compliant.
Ideally, a specialized IT lawyer should be consulted in the early planning phase in order to develop the optimal transaction structure. Expert support is essential at the latest at the start of the due diligence process in order to identify IT-specific risks.
German 
English