How to Structure CPG Acquisition for Smooth Transition

searcher profile

September 28, 2022

by a searcher from The University of Michigan - Stephen M. Ross School of Business in Boulder, CO, USA

I'm looking to acquire a C-Corp CPG company. The distributors/customers have onboarding processes and terms that would delay NewCo sales and collections for months. Additionally, OldCo is in the food space, which requires certifications NewCo would need to have. I'm guessing that it is similar to a regular restaurant purchase, but more complex since OldCo is an approved vendor for its customers. I have not had access to customers to discuss the process and complexities.

Ideally, this would be an asset purchase, but it appears that a stock purchase is needed for continuity. Any recommendations on how to structure the transaction or go about the situation?

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Reply by a lender
from University of Wisconsin in Madison, WI, USA
Bob - I would recommend consulting with one of the 2 below mentioned attorneys to see what they would recommend. From what you're describing, a stock purchase may be the path of simplicity, but it also comes with substantial risk:

Eric B. Pacifici Owner / Partner SMB Law Group Email: redacted Phone: ###-###-#### Website: https://www.smblaw.group/ Eric Hsu Owner Clear Focus Law Email: redacted Phone: ###-###-#### Website: https://clearfocuslaw.com/
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Reply by a professional
from Dartmouth College in Los Angeles, CA, USA
You might be able to structure it as a 338h10 election which allows the transaction to be treated as an asset deal for tax purposes, but is otherwise a stock deal. But make sure you have tax representation on this to make sure it's available and you structure it the right way to get that treatment. Not tax advice....
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