Buying a Business' 50% Shareholder

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by an investor
in Marco Island, FL 34145, USA

1yr ago

Buying a Business' 50% Shareholder

I am in the process of buying a business. There are two shareholders, each owning 50% of the company. One shareholder is staying, and one is leaving. Should I recapitalize the whole company and have the other 50% shareholder reinvest in Newco or buy the 50% shareholder? What are your thoughts and opinions on this question?

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reply by a lender 1yr ago
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA

Whether you buy 50% of the existing shares or membership interest or setup a new entity that you jointly own with the other partner, either way lenders are going to want the business to fully back the loan. It is very hard to get a lender to just back a stock or membership acquisition without having the primary lien on the business and the business on the hook for the debt. The issue you may have in this scenario is convincing the individual retaining ownership that their interest in the business will be on the hook for the debt as well (assuming you are using debt). If you have questions you can reach me here or directly at redacted