Sale of a company with real estate property

Standard corporate transactions primarily focus on performance, growth potential, and financial indicators like EBITDA. In contrast, a real estate sale is primarily about location, technical condition, market price, and the legal status recorded in the Land Registry. Selling a company with real estate assets combines these two worlds and requires a comprehensive assessment that includes both financial and business analysis, as well as a detailed review of all aspects related to the property. 

Correct valuation, optimisation of tax impacts, and risk minimisation are key in this context to achieving a successful and profitable deal.

If the company's key asset is an industrial park, we also recommend the article how to sell an industrial park, which focuses specifically on the sale of this type of property.

This report deals with this unique issue. Its goal is to provide a detailed and exhaustive analysis that guides the reader from the initial strategic decision on the form of sale, through the pitfalls of valuation and thorough due diligence, to the secure closing of the transaction. The report highlights key differences and practical recommendations that are essential for business owners preparing for such a demanding transaction.

If you are selling a company with real estate through a share transfer, the standard rules for an s.r.o. (limited liability company) apply—a written agreement with certified signatures, possible approval from the general meeting, and registration in the Commercial Register. We describe in detail how the share transfer process works.

Strategic Decisions and Preparation for Sale

One of the first and most important strategic decisions when selling a company with real estate assets is choosing the transaction structure. There are primarily two options: a Share Deal (sale of a business share/shares) or an Asset Deal (sale of the property itself, i.e., the real estate and other assets). The choice between them has fundamental implications for the entire course of the transaction, including legal, tax, and financial aspects.

Share Deal

In a Share Deal, the seller transfers their share in the company (e.g., an s.r.o. or a.s.) that owns the real estate to the buyer. The subject of the sale is therefore not the property itself, but the entire entity—the company with all its assets, rights, and liabilities. The buyer thus acquires the business as a whole and becomes the new partner or shareholder. The real estate remains the property of the original company; only the owner changes, which is recorded in the Commercial Register. This process is called "universal succession" and is characterised by its administrative simplicity, as it is not necessary to transfer individual assets and contracts (e.g., lease relationships, supplier contracts).

Asset Deal

Conversely, in an Asset Deal, individual assets (e.g., land, buildings, machinery) are sold directly. The original company remains in the seller's possession, who temporarily "carves out" only selected assets from it. The buyer becomes the direct owner of the real estate, which is recorded in the Land Registry. This type of transaction gives the buyer greater control and certainty, as they can choose which liabilities and assets to take over. They do not have to worry about the original company's hidden debts or legal disputes.

Key Differences and Comparison

The choice between the two structures depends on a number of factors, including the preferences of both parties, their tax situation, and their willingness to bear risks. While a Share Deal is often more tax-advantageous for the seller, an Asset Deal offers the buyer greater security.

Before you start dealing with the real estate, you need to decide on the form of the transaction. A comparison of both paths, including taxes, liability for debts, and employee transfers, can be found in the article share deal versus asset deal.

Impact of the Abolition of the Real Estate Acquisition Tax

One of the key factors that has recently influenced the choice between a Share and an Asset Deal is the abolition of the 4% real estate acquisition tax. This tax, which was abolished in 2020 with retroactive effect from December 2019, previously burdened the buyer in an Asset Deal. This resulted in a situation where buyers often insisted on a Share Deal to avoid this financial burden.

However, the abolition of the real estate acquisition tax has eliminated this tax disadvantage of the Asset Deal, making this form of transaction significantly more attractive for the buyer. This legislative step has led to the Asset Deal now being preferred in many cases, as it allows the buyer to gain control over the property without having to assume all the liabilities and hidden risks that come with purchasing an entire company.

This has strengthened the position of the Asset Deal as an equal and often preferred alternative, giving the seller more negotiating power and a better chance of finding buyers who prefer a lower level of risk.

The decision whether to sell a share in the company or the real estate itself has the greatest impact on real estate companies. A comparison of both options, including the practical effects on lease relationships, can be found in the text about how a share deal versus asset deal works.

Valuation of a Company with Real Estate Assets: How to Avoid the Most Common Mistakes

Correct valuation is crucial for a successful sale, but for a company with real estate, it often becomes a source of misunderstanding and transaction failure. Business owners tend to value their assets using a summation method, where they add the book value of the building, land, and machinery to the value of the business. However, this approach leads to a significant value gap between the seller's expectations and the buyer's offer.

The Investor's Perspective: The Income Approach

Investors and buyers look at a company with real estate primarily from the perspective of income, not assets. They use the income approach, which values the business's ability to generate profit (the "going concern" principle). The basis is the EBITDA indicator (earnings before interest, taxes, depreciation, and amortisation), which is multiplied by an industry coefficient (multiplier) typically ranging between 3 and 7. The value of the real estate in this approach is not an additional item to be added to the price. It is perceived as a key asset (along with machinery, employees, and equipment) that helps generate EBITDA.

From this perspective, a building, like a production line, is merely a means of making money. The investor calculates how quickly their investment will be returned and makes a corresponding purchase price offer. If the real estate were the largest asset but the company was loss-making, its value would only equal the market price of the real estate, not the value of the business.

This different perspective is the main reason why sales of companies with real estate often stall at the very beginning. The seller sees high value in the assets and expects this value to be fully reflected in the purchase price. The buyer, however, assesses what the company is capable of earning and how much their investment will return in future profits.

Strategic Recommendations for Owners

To avoid this "value gap," owners should consider several options. One is to transfer the real estate out of the company's assets into personal ownership or a separate company before the sale. In such a case, the seller sells the business as such for its income value and also sells the real estate separately for its market price. This allows them to get paid for both and achieve a better selling price.

Preparation for Sale: Optimisation and Clean-up (Pre-Due Diligence)

Thorough preparation for the sale is critical. Experts often call it "pre-due diligence" because it is an internal review aimed at identifying and eliminating weaknesses before the buyer's due diligence begins. It's not just about gathering documents, but about actively "cleaning up" the company, which can significantly increase its value and facilitate the entire sales process.

A key aspect is to get rid of "tax optimisation" practices and ensure that the financial statements are accurate and transparent. Investors only value official figures, and anything earned "on the side" will not be included in the value of the business. Any discrepancies can lead to doubts and a reduction in the offered price from the buyer.

A proactive approach to preparation changes the dynamic of the deal from defensive to offensive. When the seller themselves identifies and resolves weaknesses (e.g., legalises unauthorised constructions, repairs obvious technical defects in the property, ensures clear contracts with suppliers), they remove the buyer's arguments for a price reduction and build trust.

The owner should be aware that any defect discovered during due diligence undermines trust and can slow down or even stop the transaction. Careful preparation with the help of external advisors is therefore the best investment for achieving a higher sale price and a smooth transaction.

Transaction Phases Step by Step

Selling a company, especially one with real estate assets, is so complex that it cannot be done without a team of experts. One of the most common mistakes sellers make is relying on a single advisor, typically a real estate agent, who often lacks the necessary competence for a complex M&A transaction.

The Role of a Real Estate Agent vs. an M&A Advisor

While a real estate agent is an expert in the property market and can excellently prepare and present a site for sale, their expertise often ends at the boundaries of the company itself. Selling a company (a Share Deal) requires deep knowledge of commercial law, accounting, tax regulations, and the entire M&A process. A real estate agent is a transaction broker who has an interest in its closing, whereas a lawyer defends the interests of their client. In a Share Deal, where all liabilities are assumed, the involvement of M&A specialists and lawyers from the very beginning is crucial.

Key Specialists in the Sales Team

1. M&A Advisor: Coordinates the entire sales process. Helps with preparing the company, approaching potential buyers, negotiating, and managing the entire timeline.

2. Lawyer: Ensures the legal correctness of contracts, oversees due diligence, and minimises legal risks. Selling a company with real estate requires a lawyer specialised in business transactions and real estate law.

3. Tax Advisor: Assesses the tax implications of both transaction options, proposes the most tax-efficient structure, and assists with tax due diligence.

Due Diligence: The Heart of the Transaction and the Key to Success

Due Diligence (DD) is an in-depth review conducted by the buyer and their team of advisors to verify the condition of the company being purchased and to identify all related risks. It is the most important phase of the transaction, revealing potential deal-breakers or reasons for adjusting the purchase price.

Types of Due Diligence in Real Estate Transactions

1. Legal due diligence: This reviews the status of title deeds, the absence of liens, easements, court disputes, enforcement proceedings, and other legal defects.

2. Financial and tax due diligence: This analyses financial statements, tax returns, and liabilities (e.g., real estate tax, VAT).

3. Technical and environmental due diligence: This assesses the technical condition of the property and any environmental burdens on the land. This can lead to hidden costs for the buyer, for example, for remediation.

The Risk of "Unauthorised Construction" as a Potential "Deal Breaker"

A specific risk for the Czech environment is the existence of so-called "unauthorised constructions," i.e., buildings that physically exist but are not legally registered in the Land Registry or were built without a building permit. The physical existence of such a building is legally worthless to an investor because it cannot be disposed of or used as collateral for a bank loan.

The consequences are serious: the building authority can order its removal and impose hefty fines, which can run into millions of crowns. Moreover, under the new Building Act, the subsequent legalisation of these constructions is very uncertain, as it requires compliance with the zoning plan, which is often not met.

Areas of Due Diligence and Specific Risks

Contractual Security and Financial Escrow

After a successful due diligence, the phase of negotiating contractual terms and preparing documents follows. The purchase agreement (whether a Share Purchase Agreement or an Asset Purchase Agreement) is a complex document that must cover all aspects of the transaction in detail, including the seller's representations and warranties about the state of the company and the property.

To ensure the secure transfer of funds, it is essential to use an independent financial escrow. Attorney, notary, or bank escrow is commonly used for this purpose. The funds are released to the seller only when all contractual conditions are met, such as the successful registration of ownership in the Land Registry. This protects the buyer from losing money if the transaction does not go through, while also giving the seller certainty that the buyer is able and willing to pay.

Closing the Transaction and Maximising Value

The final phase of the transaction is its closing. In an Asset Deal, the key is the transfer of ownership in the Land Registry, which takes place only after the application for registration is filed and approved. This can take several weeks, so the contract must address the transitional period, i.e., who bears the operating costs and who collects any income. In a Share Deal, the ownership of the share is transferred when the agreement becomes effective, which is significantly faster, but it is necessary to ensure the change is registered in the Commercial Register.

As part of the handover, it is also necessary to formally transfer all contracts with utility suppliers (electricity, gas, water) and hand over all key documentation, including building and technical plans, permits, and contractual agreements.

Summary of Key Points for a Successful Sale

Selling a company with real estate assets is challenging, but with adequate preparation, it can be very successful. Achieving an optimal result depends on several key factors:

• Realistic expectations: Owners should realise that investors value a company primarily based on its profitability, not by summing the value of its assets and business. A realistic valuation is essential for finding a suitable buyer.

• Proactive preparation (Pre-Due Diligence): An early "clean-up" of the company and a review of all risks before the sale will remove future obstacles and strengthen the seller's negotiating position. This includes legally addressing unregistered buildings, optimising financial statements, and reviewing key contracts.

• Assembling the right team: Relying on a single real estate agent is insufficient. The transaction requires a team of specialists—an M&A advisor, a lawyer, and a tax advisor—who complement each other and ensure a smooth process.

• Patience and precision: The entire process is long and demanding, but careful and precise work at every step will pay off many times over in the form of a higher sale price and minimisation of future complications.

Overview of Key Points for a Successful Sale

Selling a company that includes real estate is not a routine transaction, but a strategic operation that requires a comprehensive and proactive approach. The analysis shows that the key to success lies in a precise understanding of three main pillars.

The first is the strategic decision on the transaction structure, i.e., the choice between an Asset Deal and a Share Deal. A comparison of the two options reveals that the abolition of the real estate acquisition tax has significantly changed market dynamics and made the Asset Deal much more attractive for the buyer. This factor provides the seller with greater flexibility and should therefore always be taken into account.

The second pillar is a realistic valuation of the business. The common mistake of owners trying to add the value of the real estate to the value of the business leads to failed negotiations. For the buyer, the key is the income approach, which perceives the real estate as part of the whole that generates profit. To maximise value, owners should consider separating the real estate from the company before starting the sale.

The third and most important pillar is comprehensive preparation and a professional team. Identifying and eliminating weaknesses, such as legal defects, unregistered buildings in the Land Registry, or accounting discrepancies, before due diligence is the most effective way to achieve a higher purchase price and minimise risks. The sales process then requires a team of experienced advisors—an M&A specialist, a lawyer, and a tax advisor—who will ensure that the transaction proceeds smoothly, securely, and with maximum benefit for the seller.

Selling a company whose substantial value lies in real estate has its own rules—from the choice of transaction form to the handling of lease relationships. ARROWS' managing partner Jakub Dohnal dedicated an entire book to them, How to Sell a Company with Real Estate, in which he draws on transactions worth hundreds of millions of crowns.

Regular and systematic work in these areas transforms a complex sale from a random process into a managed and successful operation. With sufficient preparation and the right advisory team, it is possible to achieve exceptional results even in such a complex situation. We summarise the broader context of the transaction market and what is changing in the rules in our overview article on acquisitions and company sales in 2026.