How to Merge Two Businesses?

[NorthernStar]

Looking to merge my small business (LTD Company - just myself) with another LTD company (two directors). Both companies work in the creative industry and would compliment each other nicely.

We have worked together on combined projects over the last two years so already have a good idea of how we work together and would see this as a stepping stone to move things up to the next level.

Currently in preliminary discussions but having never done this before it would be great to have a few pointers from someone who has been there and done that before I go and see a solicitor if preliminary talks go well.

Aside from the accounts and valuation side, does anyone know what we should be looking into? Any common pitfalls to watch out for?

 

[VeryMark]

I think I would probably speak to an accountant first to see what is the most tax efficient way of proceeding as this is likely to determine how to go forward legally. The other thing I would think you need to do is to draw up a list of assets, contracts and liabilities for both companies/businesses.

 

[akirk]

lots of options:

A buys B
B buys A
A trades shares in A for shares in B
B as above
C is created and shares provide to shareholders in A & B
etc. etc.

as Philip says - speak to an accountant

Alasdair

 

[NorthernStar]

Thanks Guys, already spoken to an accountant about this and also need to go and see a solicitor.

Aside from the financial issues, the concerns I need to address include, what happens if one of the directors decides to leave, what if someone dies, is there a way to easily separate a business again if things go wrong, what sort of decisions should be 'unanimous' etc?

Anything else we will need to consider?

 

[Billmccallum]

Thanks Guys, already spoken to an accountant about this and also need to go and see a solicitor.

Aside from the financial issues, the concerns I need to address include, what happens if one of the directors decides to leave, what if someone dies, is there a way to easily separate a business again if things go wrong, what sort of decisions should be 'unanimous' etc?

Anything else we will need to consider?

Your solicitor should be able to advise on these issues, but shareholder agreement and directors contracts should be top of the list, these documents should set out the agreed format of any changes and process of valuing in the future.

 

[akirk]

It is far more difficult to split a business than nto merge two - so build your directors agreements / shareholders agreements about the new business moving forward in the event of leavings etc. - not splitting the business...

Alasdair

 

[jim_price]

Thanks Guys, already spoken to an accountant about this and also need to go and see a solicitor.

Aside from the financial issues, the concerns I need to address include, what happens if one of the directors decides to leave, what if someone dies, is there a way to easily separate a business again if things go wrong, what sort of decisions should be 'unanimous' etc?

Anything else we will need to consider?

The issues you have identified should be covered by the shareholders agreement, you might also want to contemplate "drag and tag" clauses for where an offer is made for some or all of the company. Your solicitor will give fuller advice.

If a director leaves or dies and there is a requirement to buy that directors shares you ought to consider a shareholder protection insurance policy.