Acquisition structuring

Water Cooler Investing
#1

Hi all,

I’d appreciate comments/help on structuring an acquisition of a privately held UK company:

Background

The primary goal is to acquire a privately held UK company which has no debt outstanding, for an agreed price of $1m. The secondary goal is to structure the deal so that the acquirer’s costs of acquisition ($1m) end up going into the target company as $500k equity and $500k debt owed to the acquirer. Given that all of the $1m is going to the vendor, the secondary goal is the tricky bit.

Suggestions

  1. I would welcome any suggestions, particularly from people who have done something like this before.

  2. I would welcome comments/thoughts on the following route:

i) Set-up SPV A and fund it using $500k equity and $500k shareholder loans so that it has $1m cash.

ii) SPV A acquires target company B using the $1m cash.

iii) Merge target company B and SPV A, which merges their balance sheets so that the new entity C owes $500k to the shareholders.

Thanks!

T

#2

Why not have Acquirer Co loan Target Co. $500k and have Target Co. buyback half of its shares. Then Acquirer buys the other half for $500k. Problem solved. You should probably have a tax attorney in on this providing the real advice if this is a real world question though.