Major business transactions in the U.S., including in Denver, Colorado, often involve a large company acquiring a closely held business that has the potential to make a profit. For many successful business owners, newcomers like Farmland Partners Inc. are not stable enough to acquire small businesses. However, that may change.
According to sources, Farmland Partners Inc. has made an offer to buy Hudye Farms for $24.5 million. Farmland Partners is a new publicly traded company in the state and it currently owns 38 farms in three different states, including in Colorado. Hudye Farms owns 12,500 acres of farmland; most of the assets are located in eastern Colorado. Farmland stated that the deal involves lease agreements with six current renters of the farmland for three years. They are expecting to close the deal this coming June. The traded company has stated that this business transaction would increase Farmland's acres to nearly 23,000, doubling its portfolio. The business acquisition provides Farmland with a significant scale in Colorado and may give the company the ability to decrease the input costs for the tenants. Farmland Partners reportedly plans to operate as a real estate investment trust.
Making decisions to purchase an existing business is not an easy one. For instance, the business owners must decide if they are going to purchase assets or stocks of the business. Asset purchase transactions may be better than stock purchases and sale transactions because a business owner may be able to specify the liabilities that it might assume in the acquisition. Buying the assets rather than the stock may prevent problems caused by shareholders who disagree about selling their shares in the business.
Planning to acquire an existing business may require thorough planning and analysis of the pros and the cons of that business decision. Although it will require a great deal of effort, the potential benefits may be worth it in the end.
Source: Denver Business Journal, "Farmland Partners to buy Hudye Farms," Mark Harden, May 29, 2014