Experience with a stock purchase

by a searcher from Emory University

9 months ago

Just submitted my first LOI on chiro/PT practice! I originally opted for an asset purchase since the business also had a high AR and large working capital. But right before signing the LOI, the sellers broker said they only wanted to do a stock as a 338H. 

has anyone had any experience with this type of deal structure in this specific healthcare vertical or in general?

2 likes
163 views
10 comments

professional from Boston College

Phillip, to add to these comments, a 338(h)(10) election is a joint election made by a corporate buyer and the sellers of an S Corporation. It results in an equity deal for corporate purposes and an asset deal for tax purposes (though not all states recognize the 338(h###-###-#### Unless your buyer is a corporation, a 338(h)(10) election is not available to you (though a 336(e) election would be). Unless the buyer is also asking for a gross-up due to the tax impact of an asset deal, the ask is usually to simplify the transaction and avoid the hassle of an asset deal. Even with in this structure, however, the entire market has a bias to an F Reorg followed by a conversion and sale of a disregarded entity, which lands on the same tax treatment (but without the S election risk) and an equity deal for corporate purposes (e.g. no need for consents and novations). Any experienced M&A lawyer should be able to talk these structures through with you.

9 months ago | like reply | 1 like

professional from University of California, Berkeley - Haas School of Business

I will be curious to hear it they hit you with that

9 months ago | like reply | 0 likes

More on Searchfunder

Just Closed on My First Deal! Reflections and Takeaways for other Searchers

45,152 transactions are available on Searchfunder (now searchable by keyword)

Now everyone has unlimited IBISWorld access

Family office looking for traditional searchers

Examples of self-funded searcher websites

What are market terms for Seller Notes?

2 Best Ways To Find Motivated Sellers, Off-Market Deals

Sorry, but you are a broker's worst nightmare ... and how to fix it

Searchfunder is an online community and toolkit for searchfunds. Over 80% of those involved in searchfunds maintain a Searchfunder.com account to help them network, problem solve challenges, and keep up with the industry.

We maintain partnerships with database providers that make searching more effective, efficient and affordable along with features that help searchers find deals and investors and vice versa.