mergers & acquisitions 41 Should I merge my two


separate companies? Many of my Clients own or have owned two or more companies trading from the same address, and operating in the same or similar trading sectors, writes Chris Duggan of Griffins


They are presented with the following specific problems that arise from this situation:


1 Assessing how the companies as a whole are performing;


2 Spending large amounts of time in cross charging between the companies regarding staff and overheads etc;


3 Trying to remunerate key staff on how the “ whole” is performing, rather than their individual companies;


4 Not operating in the most tax efficient way, as profits are split between multiple companies.


One positive scenario for having two companies is that if the company owns large amounts of assets and equipment, they can be kept, risk free, in a separate company. If this is not the case, and there is no strong commercial reason to keep the companies separate, then the recommendation would be that they should be integrated in to one company.


The key points to be considered for integration are:


a One company to acquire all the shares of the other companies - therefore creating a group structure;


b Once the group is in place, the acquired companies can transfer all their assets and liabilities, including goodwill, into the acquiring company;


c Full tax clearance must be obtained in advance;


d If any of the companies involved in the integration has a bank debenture in place, the bank’s approval must be obtained before the process begins;


e The rules regarding staff and the TUPE obligations that arise upon transferring them from one employer to another must be followed;


THE BUSINESS MAGAZINE – THAMES VALLEY – SEPTEMBER 2012


f If correct tax clearances are obtained, no tax should be payable in relation to the transaction. In some instances it can be a tax opportunity;


g The practical issues of this merger are not to be underestimated, and they include:


• Informing all your customers, specifically looking at customer contracts and if they need to be assigned;


• Letters to suppliers and utilities informing them of the change;


• Letters to all staff transferred giving them a period of consultation before the transfer takes place;


• Transferring any leases and financial agreements into the correct company;


• Consolidating any bank borrowing into the correct company on the same, or more favourable terms;


• Website and marketing literature to be updated;


• Filing all the appropriate statutory paperwork with Companies House and HM Revenue & Customs.


Above all else, take good professional advice on how the process should be executed and then draw up a timetable confirming what needs to be done, in what order and by whom.


If you are looking to re-structure your company in any way, or are interested in discussing this further, see details below.


Details: Chris Duggan 0118-9235020 c.duggan@griffins.co.uk www.griffins.co.uk


Leveraging debt to facilitate acquisition


Many business owners may look at their debtor book and groan. Thames Valley-based Tracey Bevis, senior new business manager at Pulse Cashflow Finance in Basingstoke, often comes across this knee-jerk reaction in her dealings with businesses across the region but believes it’s usually more productive to see the glass as being half full rather than half empty. Here she explains why.


The crucial thing to remember is that, in many cases, its debtor book is the single most valuable tangible asset a business has, particularly if it is reasonably well established and has managed to keep its borrowing at a modest level.


What may seem like a situation that’s bound to develop into a major headache for the business owner may, on the other hand, be viewed as gift from heaven by a prospective purchase.


Why? Because canny prospective purchasers know that it’s possible to reduce the immediate cash impact of a purchase by leveraging the assets in the debtor book and raising finance against them as part of a structured package to purchase a business. Further, any such deal might also involve an element of deferred payment, making it even more attractive to the prospective buyer.


In fact, invoice finance companies are usually willing to provide as much as 80% prepayment against debtors. Obviously, the target company would need to be able to demonstrate that it could service the additional level of debt, but if the sums work, then the financial structuring is straightforward.


There are acquisition-hungry buyers out there, many of whom base their acquisition strategy on these exact specifications, specifically targeting businesses with high-value debtors and low borrowings. Perhaps it is time to reposition your groaning debtor book as an asset for sale. The important thing, of course, is to get expert help from a specialist provider such as Pulse. Structuring acquisition finance based on the value of a target company’s debtor book is one


Tracey Bevis


of our key specialisms, working quickly and efficiently with the acquiring partners and introducing potential target companies to prospective buyers.


In some cases, provided we are satisfied with the quality of the target company’s sales ledger, we can get an offer on the table within 24 hours. So if you would like to find out more about leveraging the debt in your business, or structuring an acquisition based on debt, contact Pulse Cashflow Finance on the details below.


CASE STUDY


A minority group of shareholders were desperate to buy out their colleagues in an engineering company, but were struggling to find the £400,000 required for the purchase. Pulse Cashflow Finance stepped in and provided an invoice finance facility of £300,000 and helped the shareholders structure a deal that was acceptable to both sides, using this facility and making up the shortfall with a combination of cash and deferred payments.


Details: 0845-539-7003 enquiries@pulsecashflow.com


www.businessmag.co.uk


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