Buying a hotel: asset deal or share deal?

Buying a hotel is not simply about finding a price, signing an offer and reaching closing.

It is about choosing a structure.

And the structure can change everything.

It can change the tax burden.
It can change the legal risk.
It can change bankability.
It can change the warranties required.
It can change the real value of the transaction.
It can change the investor’s net return.
It can even determine whether the deal closes at all.

The question “asset deal or share deal?” may sound technical. In reality, it is one of the most strategic questions in any hotel acquisition.

Because a hotel can be an excellent asset and still become a poor transaction if it is acquired through the wrong structure.

The starting point: you are never just buying a hotel

In the hotel sector, the biggest mistake is treating a hotel like a standard real estate asset.

A hotel is a complex asset. It is a property, but it is also a business. It is a capital asset, but it is also an operating machine. It is a building, but it is also a combination of permits, contracts, staff, reputation, distribution channels, debt, capex, management and risk.

This is why, before discussing price, the buyer must understand exactly what is being acquired.

Is the buyer acquiring the property?

Is the buyer acquiring the hotel business?

Is the buyer acquiring a business unit?

Is the buyer acquiring the shares of the property-owning company?

Is the buyer acquiring the company that operates the hotel?

Is the buyer acquiring a property leased to an operator?

Is the buyer acquiring a vacant hotel, an operating hotel, a hotel under a management agreement, a franchised hotel, a hotel under a business lease or a distressed hotel?

The answer changes the tax treatment, the due diligence process, the warranties, the financing structure, the timing to closing and the sustainable price.

At investimentialberghieri.it, the principle is always the same: a hotel investment should never be assessed only on a price-per-room basis, but on the balance between property, business, operations, capital and risk.

What an asset deal really means

In an asset deal, the buyer directly acquires the asset or a defined perimeter of assets.

In the hotel sector, this may include:

property;

plant and systems;

furniture;

equipment;

licences;

permits;

contracts;

the hotel business;

a business unit;

goodwill;

commercial relationships;

staff, where applicable;

intangible assets, where applicable.

In the simplest case, the buyer acquires only the property. But in hotels, the simple case is often an illusion.

An operating hotel is never just a building. It is a structure that generates revenue every day. If only the property is transferred and operational continuity is not properly managed, value can deteriorate quickly.

An asset deal can be cleaner because it allows the buyer to define more precisely what is being acquired. But it can also be more expensive, slower and more complex.

It may require permits.
It may require assignments.
It may require third-party consents.
It may create discontinuity in contracts.
It may trigger significant indirect taxes.
It may require a new banking structure.
It may make staff transition more sensitive.
It may complicate operational handover.

An asset deal is not automatically the safest solution. It is a powerful structure, but it must be designed properly.

What a share deal really means

In a share deal, the buyer does not directly acquire the hotel. The buyer acquires the shares or quotas of the company that owns or operates the hotel.

Formally, the object of the acquisition is an equity interest.

Substantively, the buyer steps into the history of the company.

And a company’s history can contain value, but it can also contain problems.

With a share deal, the investor may obtain operational continuity. The company remains the same, contracts may continue, permits may remain with the same legal entity, and banking and commercial relationships may avoid interruption.

This can be extremely important for an operating hotel.

But in a share deal, the buyer also acquires what may not be visible at first sight:

tax debts;

social security liabilities;

litigation;

employment risks;

intragroup relationships;

unbalanced contracts;

guarantees granted;

supplier debt;

potential tax assessments;

environmental liabilities;

planning issues;

permit irregularities;

past transactions;

banking risks;

off-balance-sheet commitments;

opaque previous management practices.

A share deal does not eliminate risk.

It moves the risk inside the acquired company.

Asset deal vs share deal: operational comparison

Issue	Asset deal	Share deal
Object of the acquisition	Property, business, business unit or individual assets	Shares or quotas of the company
Operational continuity	May require assignments, transfers, consents and a new operating structure	Generally smoother if the company remains the holder of the relationships
Indirect taxation	May be more significant, especially where real estate or a business is transferred	Often lighter under certain indirect tax profiles, but case-specific
Legacy risks	Easier to isolate if the perimeter is properly structured	Remain inside the acquired company
Due diligence	Strong focus on property, contracts, permits, business perimeter and tax	Deep review of the company, accounts, debt, tax, employment, banks and litigation
Bank financing	More direct reading of the asset and real estate collateral	Broader analysis of the target company and its liabilities
Warranties	Necessary, but often more circumscribed	Essential and much more detailed
Execution timing	May be slower where transfers and consents are required	May be faster if the company is clean and well documented
Main risk	Operational discontinuity and transfer/tax costs	Hidden liabilities and corporate risks
When it is preferable	When the buyer wants to isolate the perimeter and avoid the company’s history	When the company is clean and operational continuity is critical

The table makes one thing clear: there is no universally better structure.

There is only the better structure for that specific hotel, that specific seller, that specific buyer, that specific tax profile, that debt position, those contracts and that business plan.

The false myth: a share deal is always more convenient

Many investors see the share deal as the more efficient structure.

In some cases, it is.

It can be faster.
It can reduce certain operational frictions.
It can preserve contracts and permits.
It can simplify operational continuity.
It can be less costly under certain indirect tax profiles.

But this does not mean it is always the best choice.

Because the real risk in a share deal is not what is visible. It is what remains hidden.

An undisclosed tax liability can destroy the initial advantage.
An employment dispute can reduce the net return.
An opaque intragroup relationship can distort the company’s value.
A poorly structured banking agreement can limit post-closing flexibility.
A guarantee granted by the company can become the buyer’s problem.
An undisclosed liability can emerge after the price has already been paid.

A share deal may look elegant, but it becomes dangerous if due diligence is not aggressive.

The principle is simple: in a share deal, the buyer does not only buy the value of the company. The buyer also buys its memory.

The opposite false myth: an asset deal is always safer

The opposite view is also wrong.

An asset deal is often perceived as safer because it allows the buyer to acquire a selected perimeter without taking over the full history of the selling company.

But this is not always the case.

If the hotel is operating, continuity matters enormously. A poorly structured asset deal can disrupt or weaken the hotel operating machine.

Staff may become uncertain.
Suppliers may request new terms.
Corporate clients may need to be renegotiated.
Commercial contracts may require consent.
Permits may need to be reviewed.
Management systems may need to be migrated.
Banks may request new guarantees.
The brand may require a new approval.

In a hotel, discontinuity has a cost.

And that cost must be modelled into the business plan.

An asset deal is not safer because it is called an asset deal. It is safer only if the perimeter is clear, the tax impact is modelled, continuity is protected and the first 100-day plan is already in place.

When to choose an asset deal

An asset deal may be preferable when the buyer wants to avoid taking over the full history of the selling company.

It is often advisable when:

the selling company has a complex tax history;

significant litigation exists;

debts or liabilities are not easily quantifiable;

intragroup relationships are opaque;

the accounts are not fully reliable;

the company has weak governance;

the buyer wants to completely change management;

the hotel requires deep repositioning;

the value is mainly real estate-driven;

the business perimeter can be separated;

the buyer wants a new banking structure;

the seller can transfer a clear and documented perimeter.

In these cases, acquiring the asset directly may allow for a more orderly restart.

But the asset deal must be designed with precision.

It must be clear whether the buyer is acquiring only the property or also the business, a business unit, movable assets, systems, furniture, goodwill, permits and contracts.

Every element changes the risk.

Every element changes the tax treatment.

Every element changes the negotiation.

When to choose a share deal

A share deal may be preferable when the target company is orderly, transparent and contains value that would be difficult to transfer separately.

It can be attractive when:

the company has clean accounts;

no material litigation emerges;

the tax position is orderly;

the debt structure is clear;

contracts would be difficult to transfer;

operational continuity is critical;

permits are highly relevant;

staff are stable;

commercial relationships have value;

important corporate contracts exist;

the brand or franchisor prefers corporate continuity;

the bank is willing to finance the change of control;

due diligence confirms the absence of material liabilities.

In these cases, a share deal can reduce friction, timing and discontinuity.

But it must be tightly protected.

A share deal without strong warranties is not an investment. It is a bet.

When to consider a transfer of a going concern or business unit

Between a pure asset deal and a share deal, there is a third area: the transfer of a going concern or a business unit.

In the hotel sector, this can be a useful solution when the object of the acquisition is not only the property and it is not appropriate to acquire the entire company.

A transfer of a going concern may include an organized business perimeter: assets, contracts, staff, permits, goodwill, commercial relationships and operating tools.

It can be useful when:

the buyer wants to acquire the hotel operating machine;

the buyer wants to avoid acquiring the entire company;

the buyer wants to transfer an autonomous operating perimeter;

the property is separated from operations;

the seller owns several activities and wants to dispose of only one;

the buyer wants operational continuity without assuming the entire corporate history.

This structure also requires great care.

A transfer of a going concern has its own legal and tax logic. It may involve liabilities, assignments, employment issues, tax treatment and contractual matters that must be analysed before signing.

It is not a “simple” middle ground. It is a different structure and must be designed with the same precision as an asset deal or a share deal.

The tax issue: never choose a structure only to pay less tax

Tax matters. But it should never be the only criterion.

In Italy, an asset deal, a transfer of a going concern, a transfer of a business unit and a share deal may produce very different effects in terms of VAT, registration tax, mortgage registry tax, cadastral tax, direct taxes, liabilities and continuity of relationships.

One structure may appear more tax-efficient, but become riskier from a corporate perspective.

Another may seem more expensive upfront, but allow for a cleaner perimeter.

Another may be useful to preserve operational continuity, but require much stronger warranties.

The right question is not: which structure pays less tax?

The right question is: does the tax saving justify the risks I am taking?

If the answer is no, the structure is wrong.

A professional investor does not buy the tax treatment.

A professional investor buys a risk-adjusted return.

The banking issue: which structure is more financeable?

The bank does not look at the transaction the way the seller does.

And often it does not even look at it the way the buyer does.

The bank wants to understand what it is financing, which collateral it receives, where the value sits, which risks it is assuming and which cash flow will repay the debt.

In an asset deal, the bank may have a more direct view of the property and the real estate collateral. But it still has to assess tax, capex, operational continuity, transfer timing and the buyer’s ability to operate the hotel after closing.

In a share deal, the bank must assess the target company: accounts, existing debt, contracts, liabilities, guarantees, banking relationships, governance quality and cash generation capacity.

If the company is clean, a share deal can be financeable.

If the company is opaque, the bank becomes cautious.

Many hotel deals do not collapse because the buyer has lost interest. They collapse because the bank cannot properly read the risk.

At investhotel.it, this is a central theme: a hotel transaction should not only be attractive on paper. It must be financeable, executable and sustainable after closing.

Warranties in a share deal

In a share deal, the contract must be much more robust.

It is not enough to state the price and transfer the shares.

Specific representations and warranties are required on:

accounts;

tax position;

social security liabilities;

litigation;

contracts;

employees;

permits;

licences;

planning matters;

environment;

privacy;

suppliers;

clients;

banking relationships;

intragroup relationships;

ownership of assets;

absence of undisclosed liabilities;

guarantees granted by the company;

any previous extraordinary transactions.

Economic protection mechanisms are also required.

Escrow.
Indemnities.
Price adjustment.
Locked box.
Completion accounts.
Cap.
Basket.
Deductible.
Duration of warranties.
Conditions precedent.
Purchase price adjustment mechanisms.
Indemnity clauses.
Pre-closing information undertakings.

Without these protections, the share deal is too heavily tilted in favour of the seller.

The seller wants to sell the company as it is.

The buyer wants to buy the value, not the hidden problems.

The contract exists to turn this conflict into a negotiated balance.

Warranties in an asset deal

Warranties are also required in an asset deal.

The buyer must be protected on:

title to the property;

absence of undisclosed encumbrances;

planning compliance;

cadastral compliance;

certificate of occupancy or equivalent usability status;

permitted use;

hotel permits;

systems and plant;

transferred contracts;

litigation affecting the asset;

relationships with staff and suppliers;

included movable assets;

furniture and equipment;

mandatory capex;

absence of liabilities connected to the transferred perimeter.

An asset deal should not be treated as a simple real estate sale if the asset is an operating hotel.

Because the value does not sit only in the building.

It sits in the hotel’s ability to continue generating cash after closing.

Price: asset deal and share deal are not compared on the same number

A common mistake is comparing the price of an asset deal with the price of a share deal as if they were equivalent.

They are not.

In an asset deal, the price refers to the asset or the transferred perimeter.

In a share deal, the price refers to the equity interest, and therefore must take into account debt, cash, working capital, liabilities, risks and the company’s net financial position.

This is why enterprise value and equity value must be clearly distinguished.

The value of the hotel may be one number.

The value of the company may be another.

The price paid to the seller may be another still.

The total cost of the transaction may be different again.

An investor who does not distinguish between these levels risks paying twice for the same value or failing to correctly price the debt.

In the hotel sector, this mistake is particularly dangerous because the property may look solid even when operations are inefficient, and an apparently profitable operation may conceal significant future capex.

The first 100-day plan

The best structure is also the one that allows the buyer to control the hotel the day after closing.

After signing, the hotel must continue to operate.

Rooms must be sold.
Staff must remain operational.
Suppliers must deliver.
Corporate clients must be reassured.
Systems must work.
Reputation must be protected.
The bank must remain comfortable.
The business plan must start.

An asset deal can protect against certain liabilities, but create discontinuity.

A share deal can preserve continuity, but bring hidden risks inside the perimeter.

The correct structure must therefore also be chosen based on the first 100-day operating plan.

Who will manage the hotel?
With which staff?
With which systems?
Under which brand?
With which contracts?
With which suppliers?
With which bank?
With which commercial plan?
With which management control system?
With which governance?

Buying a hotel is not about closing a deed.

It is about taking control of an operating machine.

Distressed hotels: asset deal or share deal?

In distressed hotel situations, the choice becomes even more sensitive.

If the company is burdened by tax debt, bank exposure, unpaid suppliers, litigation, employment issues or opaque management, a share deal can be highly risky.

In these cases, an asset deal may allow the buyer to isolate the acquisition perimeter more effectively.

But even here, there should be no illusions.

If the transaction involves a business, a business unit, employees, contracts, permits and operational continuity, the risk does not disappear.

It is reduced.
It is shifted.
It is negotiated.
It is warranted.
It is priced.

But it does not disappear.

In a distressed hotel, the transaction structure may be more important than the price.

A low price can be extremely expensive if it brings unmanageable liabilities with it.

A higher price can be more attractive if it allows the buyer to acquire a clean perimeter.

A share deal can make sense only if the risk is fully mapped, protected and priced.

The hotel guides on robertonecci.it insist precisely on this point: a hotel must be read as an integrated system of asset, business, operations, contracts, debt and risk.

The seller’s perspective: which structure maximizes hotel value?

For the seller, the choice between asset deal and share deal is equally decisive.

A seller that imposes a structure inconsistent with the asset risks reducing the number of interested buyers.

If the seller proposes a share deal without having an orderly company, the buyer will request discounts, heavy warranties, escrow arrangements or may abandon the negotiation.

If the seller proposes an asset deal without having clarified permits, contracts, staff, tax and transaction perimeter, the bank may slow down and the buyer may renegotiate.

Selling a hotel well means preparing the transaction structure in advance.

The seller should come to market with:

organized documents;

consistent accounts;

available contracts;

a clear tax position;

a reconstructed debt position;

verified permits;

a defined sale perimeter;

mapped potential capex;

transparent corporate governance;

alternative transaction structures.

A prepared hotel sells better than a well-described hotel.

Decision matrix: which structure should be chosen?

Situation	Structure generally preferable	Reason
Opaque target company or potential liabilities	Asset deal	Reduces the risk of assuming the company’s history
Clean company, orderly accounts and important contracts	Share deal	Preserves continuity and reduces operational friction
Operating hotel with strong goodwill	Share deal or transfer of going concern	Protects commercial and operational continuity
Distressed hotel with debt and litigation	Asset deal or selected perimeter	Avoids acquiring unmanageable liabilities
Property separated from operations	Real estate asset deal or mixed structure	Separates ownership from operations
Operations requiring full relaunch	Asset deal	Allows new governance and a new business plan
Licences or permits difficult to transfer	Share deal or transfer of going concern	Reduces the risk of permit disruption
Seller with multiple activities in the same company	Transfer of business unit or selected asset deal	Allows isolation of the hotel perimeter
Financial buyer with exit horizon	Share deal if the company is clean	May facilitate a future exit
Bank focused on real estate collateral	Asset deal	Easier to read as real estate collateral

This matrix does not replace due diligence.

It clarifies the method.

First, analyse the case.
Then choose the structure.
Then make the offer.
Then sign.

Not the other way around.

Practical example: same hotel, two different transactions

Imagine a four-star hotel with 90 rooms, a good location, stable revenues, margins with upside and capex required over the next 24 months.

The seller proposes a share deal.

The buyer sees certain advantages: operational continuity, existing contracts, existing permits, stable staff, lower discontinuity.

Then due diligence uncovers overdue supplier balances, disputes with former employees, tax positions requiring clarification, undocumented intragroup relationships and underestimated capex.

At that point, the share deal is no longer automatically attractive.

The structure must be renegotiated.

Lower price.
Stronger warranties.
Escrow.
Indemnities.
Conditions precedent.
Price adjustment.
Possible conversion into an asset deal.
Possible exclusion of liabilities.
Possible closing deferral.

The same hotel may remain attractive, but the structure must change.

This is the point: there are no good or bad hotels in the abstract.

There are well-structured transactions and poorly structured transactions.

Before the LOI: mandatory questions

Before sending an LOI or accepting an offer, buyer and seller should have clear answers to at least these questions:

what exactly is being transferred?

the property, the business, a business unit or the shares?

which liabilities remain outside the perimeter and which are included?

which indirect tax treatment applies?

which structure is more bankable?

which warranties will the buyer request?

which warranties can the seller realistically provide?

are escrow or price adjustment mechanisms required?

are there contracts requiring consent?

are permits transferable or do they remain with the company?

does staff transfer with the transaction?

is the debt being repaid, assumed or refinanced?

does the business plan consider the total cost of the transaction?

does the chosen structure protect the first 100-day plan?

Without these answers, an LOI is premature.

And a premature LOI can become a negotiation trap.

Conclusion: there is no best structure, only the right structure

Buying a hotel through an asset deal or a share deal is not a standard choice.

It is a structure to be built.

An asset deal can be cleaner, but not always more efficient.

A share deal can be smoother, but not always safer.

A transfer of a going concern can be useful, but it is not a shortcut.

Tax can improve or weaken the return.

The bank can approve or block the deal.

Warranties can protect the buyer or leave the buyer exposed.

Due diligence can confirm the price or destroy it.

The real investor does not ask which structure pays less tax.

The real investor asks which structure best protects capital, enables financing, reduces risks, ensures operational continuity and produces the best net return.

First choose the structure.
Then define the price.
Then negotiate the warranties.
Then sign.

Doing the opposite means buying blind.

For hotel acquisitions, disposals, due diligence, valuations and investment structuring, visit hotelmanagementgroup.it.

If you are buying or selling a hotel and do not know whether an asset deal, share deal or transfer of a going concern is the right structure, do not send a generic LOI and do not accept a poorly structured offer. Write now to info@investimentialberghieri.it.

The wrong structure cannot be fixed after closing.

It must be avoided before.

Roberto Necci - r.necci@robertonecci.it