Why structure should come before the next acquisition

The cheapest time to separate risk is before a new business joins the family, not after.

Most growing enterprises meet their structure the hard way. A second business is bought into the same entity as the first. A valuable piece of software sits on the books of the company that sells services with it. A lease, a loan and a new product line all share one balance sheet. None of it looks like a problem until something goes wrong in one corner and reaches every other.

We think of structure as the hull beneath the waterline. It is rarely seen and rarely praised, and it decides how a vessel behaves in weather. For a holding company the questions are simple to state: what belongs together, what should be kept apart, and who decides.

Three questions to settle first

• Where should the operating risk of the new business sit, and how far should it be able to travel?
• Which assets, especially intellectual property and real property, deserve their own home?
• How will decisions be made once there is more than one company to govern?

Answering them before a transaction closes is usually faster and cleaner than unwinding an arrangement later. It also makes the next decision easier, because each new company arrives into a structure that already has a place for it.

This is general perspective, not legal or tax advice. Every structure we build for our own holdings is designed with qualified counsel and accountants, and anyone considering their own should do the same.

This article is general perspective from Deep Current Holdings and is not legal, tax or investment advice.