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Large Acquisition of Landscape Maintenance Company

Discussion in 'Business Operations' started by G-Jacobsen, Oct 6, 2019.

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  1. OP
    OP
    G-Jacobsen

    G-Jacobsen LawnSite Member
    Messages: 40

    Hal, not sure how that would work. I know he's got a home in Hawaii to retire to so I'm not sure how involved past the first year he would want to be.
     
  2. hal

    hal LawnSite Fanatic
    from Georgia
    Messages: 5,752

    In name only
     
  3. Green Mentorship

    Green Mentorship LawnSite Senior Member
    from Heaven
    Messages: 333

    Then don't change anything. Buy his shares of the company and leave everything else alone. No name change, no letters of new ownership, mum is the word. IMO if his business is 4x larger and more established/mature, yours should eventually be rolled into their trade name. Or keep running them as 2 separate businesses. But buying their Goodwill and then eliminating that business name / entity is foolish.
     
  4. OP
    OP
    G-Jacobsen

    G-Jacobsen LawnSite Member
    Messages: 40

    Green mentorship, when ownership of a company changes you have get a new employer identification number, we then have to update EIN on federal SAM (system for award management) and everything else associated with the business under the old EIN, which then triggers a new certification within the federal system. Also we have to open a new bank account for the business with our names on it and the new EIN, and then update that with the SAM so we are getting payments to us instead of the owners accounts. It's way more than just buying shares and not changing anything. I feel like that could blow up in your face if you dont say anything and the government finds out later, which they will.
     
  5. OP
    OP
    G-Jacobsen

    G-Jacobsen LawnSite Member
    Messages: 40

    We would keep their name and reputation of course, that's the whole attraction of the business is their established in the industry but we do technically, for tax purposes, need to create a new entity with same name etc. Correct me if I'm wrong but I'm not aware of any other way to do a change of ownership.
     
  6. hal

    hal LawnSite Fanatic
    from Georgia
    Messages: 5,752

    Why do you have to change your EIN? Or why do you have to change their ein are they inc? If so the owners names change but not the structure.
     
  7. ztman

    ztman LawnSite Bronze Member
    Messages: 1,388

    G-J, is this an asset purchase vs purchasing the stock of the existing company?
     
  8. OP
    OP
    G-Jacobsen

    G-Jacobsen LawnSite Member
    Messages: 40

    Ztman, that's correct it's an asset purchase.
     
  9. hal

    hal LawnSite Fanatic
    from Georgia
    Messages: 5,752

    There are many legal ways to retain the name and owner of the company being bought, major owner-minor owner, to keep the government contracts intact. It would be very worth while to pay the old owner big bucks to maintain him, on paper, as principle owner to the government until your certificates come through.
     
  10. snomaha

    snomaha LawnSite Bronze Member
    from midwest
    Messages: 1,742

    Lots of variables to consider and navigating the goverment contract world is out of my realm of experience. Doing some quick math on the purcahse price and getting a ROI - you will repay debt with after tax net profit - assuning the 400-500k net is going to take a tax haircut of 35%?, you get a ROI in 4 or 5 years (not figuring in interest expense).

    How is the leadership team in place right now? Can you negotiate a stay bonus for some of the key people?
     

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