ACQUISITIONS AND MERGERS
Multi-million dollar businesses are not built overnight. Healthy, growing companies are the product of the dedication, perseverance, hard work, and vision of their owners. While most businesses start out with a small team and minimal capital and resources, there are ways to expedite a company’s growth as the organization increases in size. One common way to instantly grow is through mergers and acquisitions.
At Bellatrix PC, our experienced business lawyers are committed to helping companies of all structures and sizes maximize their potential through advantageous management decisions. Our firm will provide your organization with respected and trusted legal counsel, and are prepared to handle matters ranging from basic negotiation of employment contracts to litigation defense. To arrange for a private legal consultation, call the law offices of Bellatrix PC at (800) 449-8992 today.
What is the Difference Between a Merger and an Acquisition?
In simple terms, an acquisition occurs when Company A purchases all of the assets belonging to Company B. In some cases, acquisition is effectively an asset purchase. In other instances, acquisition is a stock purchase, depending on the financial and legal health of the target company. Legally speaking, the target company no longer exists after an acquisition is complete.
By comparison, a merger occurs when two or more companies agree to go forward as one company. A famous example is the Daimler-Benz AG and Chrysler Corporation merger of 1998. After the merger, DaimlerChrysler AG was born. From a legal perspective, both companies continue and form a new company, combining their assets, liabilities and stock into a single entity. This is arguably the most important distinction between these two growth strategies.
A common term frequently used in M&A discussions is “synergy.” In a commercial context, the concept of synergy holds that “the value and performance of two companies combined will be greater than the sum of the separate individual parts.” In other words, the targeted companies both possess valuable attributes which will foster mutual improvements within both organizations.
For example, Mr. Baskin and Mr. Robbins might merge their small ice cream shops together to create one bigger company with less competition and more flavors. To use another example, an airline might acquire a catering company in order to bring its food service in-house. The airline is now able to generate additional profits by offering passengers meals where the option had previously been absent, while the catering company benefits by adding a new client to its portfolio.
Legal Factors for Employers to Consider
Employers must consider many important factors at the outset of any deal in which one company is going to merge with or acquire another, including but not limited to matters such as:
- The logistics of a complete due diligence.
- Positive and negative tax consequences.
- Employment law consequences, such as workforce reduction.
- Stockholder consequences and voting requirements.
- Negotiation of terms, including purchase price and form of transaction.
- Practical and logistical considerations regarding the merging of operations, facilities, and technology.
- Structure of all pertinent legal agreements, including warranties, representations, and indemnification concerns.
- Executing and filing all required legal documents with the appropriate government agencies.
The legal and financial structure of a merger, acquisition, or other change to company ownership is of critical importance to all invested parties. Not only does this structure impact the form and liabilities of the ongoing business, it also affects the protections available to the new and former owners, the taxation of each entity and its owners, and even the employment and wage status of the workforce, including situations where no employees are terminated.
When these concerns are not clearly defined and communicated prior to the actual sale, the parties involved may have differing ideas about the extent — or existence — of their liability. Failure to address each detail of the sale prior to conducting the transaction can create buyer’s remorse in the future, or even destroy the deal completely. For the sake of avoiding unpleasant surprises and maximizing the efficiency of your transactions, it is prudent to work with an experienced legal team which can help your organization make advantageous business decisions.
Contact Our Business Attorneys
Each commercial transaction has a unique set of challenges and objectives. The experienced mergers and acquisitions attorneys of Bellatrix PC will counsel you through all specific matters, questions, and concerns you may have. We understand how important supportive guidance can be to your peace of mind, and will handle all essential elements of your transaction so that you can focus on what you do best: running your company.
If your organization is contemplating a merger, acquisition, sale, or change in ownership, it is essential to seek knowledgeable legal representation. There are a number of factors which need to be addressed from both the buyer’s and seller’ side, and a qualified attorney can help to ensure that the entire transaction is properly documented and executed. Remember, failure to address core concerns at the outset of a deal increases the likelihood that costly and time-consuming litigation will become necessary later.
To start exploring your goals and options in a confidential case evaluation, call Bellatrix PC at (800) 449-8992 today. We serve companies and entrepreneurs nationwide, with offices located in St. Louis, San Diego, and Riverside, CA.