FINANCING THE DEAL by Ben Smith
Director, Interpath Advisory
Buying a business can be a complex and not to mention stressful process and the financing of a transaction is often the most intricate part.
A buyer may be in the fortunate position where they hold enough cash to fund the deal outright - this removes a significant layer of complexity.
Often, however, many acquirers need to meet the purchase price through various kinds of financial alchemy which normally includes utilising a mix of own cash and raising debt finance.
The latter part is where issues can often arise.
The lending landscape has never been more complex with an explosion of alternative sources of finance since the last financial crisis – generally, this is a good thing.
However, navigating that world is fraught with difficulty - especially given the current “uncertain” economic environment.
When it comes to funding acquisitions areas that often trip up would-be deal doers are varied: certain lenders simply don’t operate in the acquisition space, others are cold to certain sectors and others may have computers which frequently like to say “no”.
Twenty years ago the source of finance to fund your next acquisition was probably to be found on the nearest high street and - for certain deals – this could still be the case.
However, often it takes a more thorough search of an increasingly vast market to search out the perfect finance partner to enable your deal.
Few businesses would attempt to undertake the legal work for an acquisition themselves yet far too many good acquisitions fall over because businesses don’t seek sound external insight when it comes to financing the deal.
In terms of raising acquisition finance my advice is simple… seek advice.
SHOULD YOU BUY SHARES OR ASSETS? by Chris Brown
Managing director, Brown & Co
When buying a business you must choose between acquiring its shares or its assets.
There are advantages and disadvantages to each, together with fundamental differences in both the legal and the tax treatment.
Share purchase
• Greater due diligence is required as the company is being acquired along with its historic liabilities, so you need to investigate its financial stability, management, products and services, competitive landscape, and other factors
• No immediate tax relief is available for the cost of purchasing the shares. However, if the shares are sold in the future and the original acquisition has been structured in the right way, the gain may be exempt from corporation tax
• Tax warranties and indemnities need to be included in the sale agreement to cover any potential future tax liabilities arising from any issues prior to completion
Asset purchase
• Less due diligence is required as the buyer has the ability to negotiate which assets are being purchased, leaving behind any liabilities. This means the transaction can often be completed more quickly
• Some element of the deal is likely to include an amount for goodwill. No immediate tax relief is given on goodwill, only when it is disposed of in the future. Most other assets should qualify for tax relief in the form of capital allowances
• No tax warranties or indemnities are necessary as any future tax liabilities arising prior to completion remain with the seller
If you are buying a business, it is vital to involve both lawyers and accountants at the early stages, to ensure that careful consideration is given to all the circumstances and the correct structure is used.
01253 871111
www.brownandco.uk
Plans for growth?
Interpath is a financial advisory business with over 600 experts who work across a broad range of specialisms. Our Deals team help clients to create value, seize opportunities and navigate complex situations with confidence.
Key Deals Specialists in the North West Ben Smith, Director, Debt Advisory
Based in the North West and living near Clitheroe, Ben’s career has spanned industry, direct lending and advisory. He is uniquely placed to guide businesses of all sizes to source and implement the optimum financing structure to support their objectives.
ben.smith@
interpathadvisory.com +44 161 529 9025
Rebekah Ingham, Associate Director, Deal Advisory
Based in Manchester, Rebekah advises Northern businesses of all sizes on both buy-side and sell-side transactions. Rebekah draws on her extensive experience across sectors to deliver successful outcomes for clients.
rebekah.ingham@
interpathadvisory.com +44 161 529 9011
We can help you find the right strategy
LANCASHIREBUSINESSVIEW.CO.UK
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BUYING A BUSINESS
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