The sale and purchase of private companies usually takes the form of either an asset acquisition, where the assets of a business are purchased and certain liabilities assumed, or a share acquisition.

A share acquisition may proceed by way of either of the following:

• A direct share acquisition, which is the purchase of shares in an Australian company
• An indirect share acquisition, which is the purchase of shares in a non-Australian corporation that holds shares in the Australian company.

The legal consequences may differ depending upon whether the share acquisition is direct or indirect.

An acquisition of shares is often simpler than an acquisition of assets, as it is generally only necessary to transfer the shares in the target company, which is a straightforward process in Australia. The main disadvantage of a share sale compared to an asset sale is that the acquisition of shares of the target company involves the purchase of the target company together with all liabilities (including contingent or undisclosed liabilities such as undisclosed tax liabilities, breaches of legislation affecting the business or claims by customers or employees), which may have an impact on the value of the shares being acquired.

In an asset acquisition, it is necessary to separately deal with and transfer or assign each asset and assumed liability. The seller may select which assets it wishes to divest more easily under an asset sale than under a share sale. The seller may also wish to retain the corporate entity in order to use tax losses, which it cannot do under a share sale. An asset acquisition is therefore often more logistically complex and time-consuming than a share acquisition. In contrast to a share acquisition, under an asset acquisition, the seller retains all liabilities not specifically assumed by the buyer.

Bilateral negotiations are the traditional structure used to acquire an Australian company, however auction bid processes are an alternative to negotiating bilateral contracts. Competitive auctions are more commonly used in private equity deals.

There is no concept of merger in Australia, however a procedure known as a "scheme of arrangement" is similar. It involves two companies "merging," subject to the approval of the target's shareholders in a general meeting and the relevant court. Schemes of arrangement are rarely used in a typical private M&A transaction and are more common in a public M&A or public-to-private transaction.

A private company limited by shares. (Private companies must be either limited by shares or established as unlimited companies with share capital. Unlimited companies are not common in Australia.)

There are limited and unlimited companies. In the case of limited companies, the liability of shareholders is usually limited to the amount of their capital contribution in the company; in the case of an unlimited company, the personal liability of the members for the debts and obligations of the company is unlimited.

A proprietary company cannot have more than 50 non-employee shareholders and must have at least one director who is ordinarily resident in Australia. Shares in a private company may not be offered to the public.

The acquisition of shares of the target company involves the purchase of the target company together with all liabilities (including contingent or undisclosed liabilities, such as undisclosed tax liabilities, breaches of legislation affecting the business or claims by customers or employees), which may have an impact on the value of the shares being acquired.

All that is generally required to transfer legal title to the shares in an Australian private company is for a share transfer form to be executed by the seller and buyer and then registered in the register of members of the target. The seller's original share certificate(s) in relation to the transferred shares will be delivered to the buyer at completion (or, if the share certificate(s) are lost or destroyed, an appropriate indemnity) and a new share certificate will be issued in the name of the buyer.

In an asset acquisition, it is necessary to separately deal with and transfer or assign each asset and assumed liability in accordance with the contractual, legislative or other requirements governing that particular asset or liability. The seller may select which assets it wishes to divest more easily under an asset sale than under a share sale. The seller may also wish to retain the corporate entity in order to use tax losses, which it cannot do under a share sale. In contrast to a share acquisition, under an asset purchase, the seller retains all liabilities not specifically assumed by the buyer.

When a business is being transferred by way of an asset purchase, each individual asset must be transferred in accordance with the formalities for a transfer of an asset of that nature. In respect of some assets, this will simply be a case of physically delivering the asset to the buyer but, in other cases, the formalities are more prescriptive, such as in the case of real property (where a separate instrument of transfer must be delivered and later registered).