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Buying Aged Corporations to obtain corporate credit. Does anyone have experience with this concept?

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Answers (3)
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How to Buy a Business
WA

When you say "corporate credit", are you referring to trade credit from suppliers? Or access to bank loans and lines of credit?

Jul 1, 2009
David Collins
Glentyde Capital Advisors, Inc.
CEO / Owner
Mecklenburg County, NC

I like the way you think, Mark....the credit history (and long-standing banking relationships) of an established corporation are intangible assets that can have significant value, but are also assets that are frequently not considered in the pricing of the company. Everybody's focused on the tangible assets and the cash flow, and they forget to bring the intangibles into the pricing equation.

Couple of suggestions: For one, check the existing loan agreements carefully; make sure that significant changes in stock ownership (50%, 80%, however they might be defined in the docs) won't trigger any clauses or provisions that might frustrate your objective. E.g., some credit agreements are only "valid" as long as the corp doesn't have a significant change of command, so to speak.

Also, make sure that the corporation has indeed been standing on its own balance sheet, and not merely using the credit strength of its stockholders via personal guarantees of corporate debt. The former stays with the corp., whereas the latter goes home with the shareholders at the end of the day.

Best of luck!

Jul 1, 2009

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