Mergers & Acquisitions
Empire Business Law
Mergers and acquisitions are a subject that many business owners find themselves on, whether they're small or large. Regardless of the size, your company has mergers can be an important step for you as well and require careful attention to detail with rigorous negotiations in order to make them successful!
Mergers and Acquisitions
Mergers vs. Acquisitions: What's the Difference? Mergers and acquisitions are a way of structuring the purchase and sale between parties. The choice depends on what's best for both sides, but typically there is more than one option available so it can be confusing deciding which will work out in your favor!
Mergers
In the world of business, mergers are not as common as acquisitions. Merging two companies together can create a new entity with all their assets and liabilities intact from before which means no more need for any type or additional funding needed to run them both smoothly after completion! This also offers financial benefits including revenue growth due to diversifying your portfolio; cutting operating costs by combining resources between divisions/departments where possible (this will depend on what you're doing); improving efficiency because there's less wasted time spent traveling between offices etcetera
The process generally takes two forms:
- Merger. In a typical merger, the buyer’s and seller’s management and board negotiate with each other and agree to terms. Shareholder approval is also needed, but management and the board will recommend the merger.
- The tender offer is a great way for management and boards of directors who don't want to let go of their company's shares but need money quickly or have been bought out by another entity. The buyer goes directly into negotiations with shareholders allowing them access throughout all levels. There are three types: hostile where only one side makes an offer; defendable which means both sides put up defenses before deciding whether they'll accept any proposal made between themselves.
Acquisitions
In an acquisition, one company buys the other. The deal then can be structured in either of two ways:
- Asset Purchase. This involves the purchase and sale of some or all of the company’s assets and liabilities. These assets may include anything that the business owns, including inventory, equipment, vehicles, machinery, land, leases, copyrights, and other intellectual property.
- Stock and Equity Sale. In this type of transaction, the company’s ownership interests are acquired rather than specific business assets.
Rights & Liabilities
Although often paired together, mergers and acquisitions create significantly different rights and liabilities post-merger or acquisition.
ACQUISITIONS: The company buying a business does not have to take on its liabilities and debts. This includes situations where:
- When the purchaser is an extension of the seller, i.e. when the directors, officers and the shareholders for the purchaser and purchasee remain the same through the sale.
- Where the sale is fraudulent, for example: if the seller cannot pay its debts off to creditors.
- Lastly, when the purchaser, usually for a lower sale price, agrees to assume the purchasee’s debts.
The shareholders of a purchasee have the right to an appraisal by a neutral third party if they disagree with the sale. This means that there should be some form of guarantee in place providing protection for minorities, such as requiring approval from a two-thirds majority before any deals are finalized.
A company's boardroom is not just about making money; it has been established over time through various rules and regulations which give incentives towards protecting minority interests too - including those associated with stockholders who may not agree on certain asset transfers.
Most acquisitions happen through stock purchase, and this means that the new owner takes on all debts, even if they were not aware of these before-hand. It’s important to conduct due diligence before entering into an agreement for acquisition so you don't end up surprised like one company did when their liability doubled after buying out another business!
MERGERS: As an intial matter, like acquisitions, there is liability in regards to the shareholders of the purchasee, who can oppose the merger and have their shares appraised by an independent party (usually a court). In a merger, the purchasing company assumes all liabilities of the purchasee.
The assumed liablities include, criminal penalties and tort liabilities incurred prior to the merger. Further, any legal proceedings against the purchasee will continue, without requiring any formal substitution of the purchasing company for the purchasee. In turn, if the purchasee filed suit against a third party prior to the merger, the purchaser may continue that suit.
Who Are The Parties Involved?
Mergers and acquisitions typically involve multiple parties who help facilitate a successful transaction. The primary ones include:
- Business brokers. Brokers can help evaluate the business, develop materials needed to show to interested buyers, and list the sale.
- Investment bankers. Investment bankers often get involved in larger transactions and like brokers may solicit and talk with potential buyers and put together the seller’s financial information. They may also run an auction of the business.
- Appraisers. Business appraisers assist in valuing the business in smaller transactions or may be hired by the bank financing the transaction.
- Attorneys. Corporate lawyers can help with due diligence as well as reviewing, negotiating and drafting the purchase and other ancillary legal documents.
- Other advisors. Accountants, consultants (business, IT, environmental, etc.) and other professionals may also play a role in merger and acquisition transactions.
What Are The Main Costs Aside From Legal & Finacial Advisor Fees?
When a company wants to buy another, they hire someone called "the proxy solicitor" who will go through all of their shares and gather enough votes for them. The purchasing entity also has to pay an exchange or paying agent in order to accept payments from this offer with ease--and if there's been any merging involved too then it'll need more consideration paid out before everything can be finalized! Further, the purchasing company will pay for printing and mailing the necessary documentation to the shareholders. If the merger or acquisition is hostile, the purchaser may also have to hire a public relations agent.
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