I am a solo self-funded searcher currently under LOI for a relatively small acquisition (~$500k), intended to be structured as an asset sale.
The business is, essentially, a marketplace business where suppliers agree to provide service to customers at an agreed rate, and customers pay an ongoing subscription fee to have access to that pricing from those suppliers. There are hundreds of suppliers, all with agreements that I have now found out are not assignable without written consent, and thousands of subscribed customers where I'll want to minimize churn.
I'm struggling to wrap my mind around how to maintain continuity in the cutover to my NewCo, and am curious how others have approached similar situations. The two options I can think of right now include:
1. Tie seller getting paid fully to the successful assignment of all the existing contracts, perhaps with a cliff % and then a proration up to 100%. (pros: I get to have a NewCo and seller is invested in a smooth transition, cons: higher level of effort in transition, likely some amount of unwanted churn)
2. Re-structure the deal as an equity purchase (pros: no/minimal continuity issues with suppliers/customers, cons: assume all potential liabilities of existing business, and I expect higher legal costs for a relatively small deal)
Any advice from those who've been down similar paths before?