The future owner of the company should already contact potential providers of funding during the early stages of the project. Financing can only be arranged if the project is well-planned and measures have been taken against the risks that it involves. Commitment of the owners and sufficient self-financing are essential requirements for a successful corporate reorganisation. In company acquisitions, the seller may also provide some of the financing.
A company acquisition may be carried out as a business acquisition or as an acquisition of shares . The method selected should always be on a case-by-case basis and experts should always be consulted during the planning stage. Advice is available at start-up centres, regional business companies, entrepreneurs' associations, accounting agencies and brokers specialising in company acquisitions (such as the Finnish Association of Business Brokers, www.yrityskaupat. net).
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In a business acquisition, the buyer usually sets up a new company that acquires the other company's business or parts of it (machinery and equipment, premises, personnel, trade name, etc.). The financial and legal liabilities are not transferred to the new owner. Financing is sought for the buying company, and its collateral, such as business or real property mortgages, may be used as collateral for the financing.
In sole proprietors, general partnerships and limited partnerships, a business acquisition is the most common and usually the smoothest way of carrying out a company acquisition.
When acquiring limited liability companies, many buyers also want to purchase the business rather than the company's shares because it is easy and allows them to minimise any historical risks associated with the company. In such cases, the buyer is only responsible for the company's future and has only a limited risk. Moreover, the buyer can write off the goodwill of the acquired company over a period of ten years.
In an acquisition of shares, the buyer purchases the shares or the majority of shares in a company. The acquired company will usually continue to operate under its old name and business identity code. The financial and legal liabilities of the acquired company will remain unchanged. The shares can be purchased by a natural person or using an auxiliary company.
Personal share transaction
The buyer may decide to finance the company acquisition by submitting an application for a personal loan to Finnvera. However, even in small companies, the share prices can be so high that financing the acquisition by means of a personal loan is not feasible or even possible.
Using an auxiliary company
In such cases, a common option is to use an auxiliary company in whose name the shares are purchased. Financing for an auxiliary company is usually provided by Finnvera and a bank, in addition to which self-financing is also required. In company acquisitions, a self-financing of 20% is typically required. The buyer may also acquire financing for the purchase by taking a personal loan from Finnvera.
The buyer's financing needs can often be reduced using a variety of measures. These include the redemption of the acquired company's shares within the limits permitted by the Limited Liability Companies Act before the remainder of the shares are sold. The company may also be split so that the assets outside its core business are made into a separate company.