Merging two businesses?

I have the opportunity to merge my business with another one. My business, started in January this year, will have a first year turnover of around £100k with the potential of achieving £1M within 5 years. The other business has a turnover of £250k and will plateau at a maximum of £450k within the next three years. The current owner has unfortunately sold the overseas rights to another company for three years. Big mistake in my mind but the deal is already done. One of my next targets will be to try to break the deal but at the moment it should not be taken into consideration. The potential of the two businesses combined is probably over £1M in three years time. The other business has 700 customers, I only have 80. Most of their customers will also buy from us once the two businesses are combined. The owner of the other business is not a business person but a very good creator, which I lack in my business. The other business is using a fulfilment company to do their invoicing and shipping at a cost of 7% of turnover + freight charges + storage charges. This is something we can immediately stop as my company has the facilities to store and invoice. I would like to merge the two companies and need some suggestion on the engineering of the deal. I own 80% of the shares of my business, the other 20% are owned by a partner with lots of contacts in the industry but he did not put capital in the company. The other business is owned at 100% by the current owner. The merged company would benefit from an injection of capital of around £100k which would help with cash-flow issues. My idea is to reduce the shareholding of my partner to 10%, give 20% of the new company to the owner of the other business. Then try to find an angel to put up the £100k for a little as possible of the remaining 70%. Have I missed something? Could I do it any other way? How can I present this to both the owner of the other business and my current partner? What do you think?

2 months ago - 0 answers