Lets talk mergers.

When discussing the structure of a small business acquisition, a lot of attention is given to asset vs. stock deals.

But did you know there may be times when a merger *might* make sense?

Grab a mimosa, and let's chat about mergers! We all know in an asset sale the selling entity sells assets to the buying entity.

And in an equity sale, the selling equityholders sell the equity to the buyer.

But what happens in a merger?

Put simply, the buying and the selling entities "merge" together and become 1. (1/x)

Lots of talk about the BRK meeting this week. Comments about AI, climate change, and reserve currency status.

But lets be honest...what we all really want to talk about is QSBS!

It's even sexier than F Reorgs!

So grab a mimosa, and lets dig in! 🧵 Let's start at the beginning.

QSBS means "Qualified Small Business Stock".

It is stock that is issued by a "qualified small business" (QSB).

How does a business qualify as a "qualified small business"? (1/x)

In this highly-anticipated thread I do what no lawyer has ever done on Twitter before:

✳️De-mystify the 338(h)(10) election and the F Reorganization.

(If you make it to the end and don't understand the irony, I have nothing else for you).

Grab a mimosa and let's dig in! If you didn't see the prior threads on the pluses and minuses of S Corps in structuring equity acquisitions, probably go read them first.

First one is here: (1/x)

https://twitter.com/269855224/status/1640001583541780480

Last week we discussed why entrepreneurs like S Corps (link below), but I promised a follow up and here we are!

This week, we hit on some of the downsides of S Corps, particularly in the M&A context

So grab a mimosa and let’s dig in! 🧵

https://twitter.com/KHendersonCo/status/1640001583541780480

1️⃣ Ownership Requirements

An entity taxed as an S Corp can only be owned by certain eligible shareholders.

Generally thins means that your entity can’t:

➡️ Be owned by more than 100 shareholders
➡️ Be owned by non-U.S. citizens or non-U.S. resident (if not a citizen) (1/x)

You've heard of them, you may even have one, but do you really understand what an S Corp is?

In this thread I break down exactly what "S Corp" means and why they're popular in SMB.

In a future thread I'll address their drawbacks in M&A.

For now, grab a mimosa and let's dig in! First, lets break down what an “S corp” is.

Contrary to what many think, an S Corp is NOT an entity type.

In the SMB world, from an organizational perspective, you usually only have corporations, LLCs, and occasionally sole proprietorships. (2/x)

Let's talk Estate Planning!

I've recently been working on updating our Estate Plan (EP) and thought it would be helpful to summarize why EP's are important generally, but also why you should routinely review and update yours.

So grab a mimosa, and lets roll! 🧵 Many people say the most important reason to have an estate plan is to avoid probate.

I disagree!

For me, it's all about my kids.

The rest is just gravy.
(1/x)

💥Exciting Announcement!💥

I'm incredibly honored to be joining the team responsible for the @SMB_ash, the best in-person conference focused on ETA!

Brandon, Matt and Sam started something special with SMBash '22, so I consider myself lucky to join an accelerating rocket ship. For those that aren't familiar, @SMB_ash is a 3+ day conference that dives deep into the SMB search process:

✅ Sourcing Deals
✅ Working with your deal team
✅ Raising capital
✅ Running a small business

And more!

In this thread, I break down the differences between "anti-assignment" and "change of control" provisions, any why it matters.

If you've ever wondered why choosing an asset over equity deal matters when it comes to 3rd party constants, grab a mimosa and lets dig in! 🧵 What is a "Change of Control" (CoC) provision?

It says that the contracting party can't change ownership (direct or indirect) without the approval of or notice to the other party.

In a change of control provision, focus is on entity ownership, not the entity's business. (1/17)

Indemnification may be the single most important sections of a purchase agreement for a buyer, but may also be the least understood.

These 5 things will help you navigate indemnification provisions like a pro.

Grab a mimosa, and let's dig in! 🧵 1️⃣ Fundamental vs Standard Reps

Indemnification for breach of representations and warranties is split into two buckets - fundamental reps (ones that are so fundamental to the value of the business that it's catastrophic if they're wrong) and everything else. (1/x)

Alright, #SMBTwit asks and it receives!

So, lets break down entities and how to smartly create and form your HoldCo entity structure.

Grab a mimosa, and let's dig in! 🧵

https://twitter.com/blind_nut/status/1621480004054880257

Step 1: Determine if there will be more than one party (e.g. partners or third party investors) at any level of the structure.

If yes, stop. Hire a lawyer. More on this below.

If no, go to step 2. (1/x)

BREAKING NEWS:

The Lipson Bros., founders of @getdutchie, were ousted two weeks ago in what they're characterizing in a new lawsuit filed in DE as a "coup" staged by the Board.

There are some lessons in here for the SMB community. But first, some background. @getdutchie was founded by the Lipsons in 2017 as Courier Plus Inc.

Since then, Dutchie has raised over $600M in VC financing, the latest round of $300M last fall at a $3.75B valuation.

To say Dutchie has been a wild success is an understatement.

Interested in building the next Berkshire Hathaway, but when you hear LLC, QSBS and pass-through tax, your eyes glaze over like a student listening to an econ lecture?

Yeah, me neither.

But still, lets break down the key considerations designing a structure. 🧵 Fair warning:

This is a really long thread, so grab a drink and get comfortable.

Then, we'll dig into the differences between LLC's, C Corps, and S Corps, and discuss some structuring strategies and how entity choice impacts whether or not they're available and how they work.

$TWTR filed its merger agreement with @elonmusk this afternoon after the market closed, so let's dig in and see what we can learn! 🧵 @elonmusk 1/ As is usually the case with public M&A, it's a reverse triangular merger. Twitter Inc. survives the merger as a private, wholly-owned subsidiary of X Holdings I, Inc. (subtle shout out to the Model X?). All-cash deal.

M&A Transaction Highlight:

Let's take a closer look at a recent public M&A deal and see what we can learn. $MSFT and $ATVI

A new weekly thread. 🧵

*See disclaimers in pinned tweet. 1/ Structure. Reverse triangular merger. Common for PubCo M&A, very rare for SMB. Why? Stock deals require all stockholders to agree. Easy for SMB, not for PubCo. Mergers require less than all (dissenters get appraisal rights).