business aquisition

[V6 inside]

Hi,
Me and my partner are trying to buy a business. Problem is that the vendor will only sell the business via share sale transaction which leads us into a few problems.
We can put in 2/5ths of the cost (goodwill and stock) cash
the other 3/5ths we need to raise via a business loan (which we can back via property)

the problem we are facing is called 'whitewashing' where you cannot raise money through a company to buy its shares, i think?
According to our solictor we are likely to encounter this due to the way the loan is structured.

Can anyone comment on a way in which we can get round this problem? We have been let down in the eleventh hour by our so called business manager and left in the lurch.

We intend to set up our own ltd company and raise the funds through it to buy the shares and thus the company.

Can anyone help?

cheers,

[wattsm666]

Whitewash is not a problem, it is a legal process that you need to go through and you will need an auditor. It is an inconvience but any auditor should be able to guide you through the process. I suggest you speak to your accountant in the first instance.

[V6 inside]

Hi thanks for your advice, but we needed some advice as a second opinon.

How much would the 'whitewash' procedure cost?

cheers

[wattsm666]

All depends on the level of risk, the auditor and directors have to certify that they are satisfied the business can trade for 12 months post transaction. This will need to be illustrated by projections with assumptions etc.

Presumably you have this already if you have raised finance. Speak to your accountants for an idea of fees, very difficult to give an idea. Will depend to some degree on the risk to the auditor etc

[srebbe64]

Shouldn't be a problem, but it sounds like you need a better (specialised) lawyer. If you want me to advise you of some decent ones PM me and I'll send you details.

[V6 inside]

To get round this problem we have now decided to raise the finance ourselves through remortgaging property. We are also opening another company to transfer the funds to and use this company to buy the business through a share sale.

Could this cause us any problems? What would be the benefits?

Thanks for the replies!!