Merging with or acquiring another company are major ways that businesses consolidate and drive economic growth. The mergers and acquisitions (M&A) practice is dedicated to providing sophisticated legal counsel towards closing your transaction. The firm has substantive experience handling M&As for both buyers and sellers and their respective concerns to protect their interests while negotiating the deal.
Mergers – The Basics
A merger is a transaction between two companies that are combined such that one of the two companies “survives” and the other is effectively dissolved by operation of law. The separate ownership and operation of the “non-surviving” company cease to exist (i.e., the “non-surviving” company is dissolved by operation of law). As a result, all the assets and all the liabilities of the non-surviving company become assets and liabilities of the surviving company.
A consolidation (which is rarely used) is when two companies are combined to create a new (and entirely different) company that consists of those two companies–both of which cease to survive.
Acquisitions – The Basics
Acquisitions are much more common in the business world than mergers, and occur when one company buys another. These transactions are typically structured in one of the following ways:
- Stock purchase. The Buyer purchases the other company’s stocks. Ownership interests, rather than business assets, are thereby transferred.
- Asset purchase. The Buyer purchases the other company’s assets (and “assumes” (takes over) certain specific liabilities). In addition to equipment, inventory, and intellectual property–buyers often acquire the business contracts (another form of asset) that the Seller has with its customers (effectively buying the Seller’s revenue stream). As a result, Seller’s will want to ensure that the Buyer will be responsible for any liabilities and obligations that arise post-closing from the contracts that were sold/transferred to (and “assumed” by) the Buyer.
How A Lawyer Helps With Mergers And Acquisitions
Considering the steps involved in a merger and acquisition, there is plenty of room for error. Having an experienced M&A attorney is essential to protect the Seller’s or the Buyer’s rights in connection with the transaction. The following is a brief description of the few steps with which an M&A attorney can assist an M&A Buyer or Seller:
- Performing due diligence for legal issues. M&A attorneys review various documents to either provide reasonable assurance that certain aspects of the Seller’s business is in compliance with certain legal requirements and otherwise is transferable in accordance with the terms of the deal.
- Preparing the legal paperwork. These include everything from confidentiality agreements (NDAs=nondisclosure agreements), letters of intent, and all the deal documents.
- Negotiating details of the transaction. M&A attorneys seek to negotiate negotiating the best deal for their client, within the parameters that the letter of intent or other general agreement between the Buyer and the Seller. As experienced M&A attorneys, this firm recognizes that all deals require that the Buyer and Seller agree on certain risks that each is required to take in order to finalize the deal. The M&A contract’s terms incorporate that allocation of risk between the Buyer and the Seller. The negotiation of the allocation of risks is an important component of every M&A deal.
Contact Our Mergers And Acquisitions Team
There’s a lot on the line with your merger and acquisition, and you deserve dedicated legal counsel that understands the objectives you and your company wish to achieve. Whether you the Buyer or the Seller, this law firm is experienced and ready to protect your business interests. Call us today for a no-obligation, preliminary discussion regarding your proposed transaction.