Combining two separate businesses into one is a complicated process—whether it is in the form of a merger or an acquisition. An accomplished lawyer will help guide a business owner through the steps involved to help the company smoothly transition. However, the guide below gives a brief overview of what you can expect.
A merger is when two separate companies consolidate into a single entity. This new organization results in a new system of ownership and management, with individuals from both of the original companies maintaining leadership roles. The newly merged company will typically have a new name.
Mergers are generally viewed as being friendly and often don’t even require cash transactions; they are planned and coordinated between both companies in an effort to shore up weaknesses and increase their competitive edge. Typically, a merger will occur between two businesses on more or less equal terms that wish to benefit from each other’s technology or other resources.
Though acquisitions are sometimes called mergers, they are quite different in execution. An acquisition is when a company will purchase over 50 percent of another business’s shares to gain control of that company. Acquisitions are sometimes negotiated between the two companies, but in many situations, the “takeover” may be entirely unexpected. Because of this, some businesses will work with a lawyer to draft measures to prevent a so-called hostile takeover.
After the acquisition, the company that bought the majority shares will have full decision-making power, including the ability to restructure the other business and replace its leadership team. However, they also take on contracts and debts that the company already had in place. Therefore, you and your legal team should examine these in-depth before the purchase.
Need help undertaking a merger or acquisition? Rely on The Law Offices of Bromm, Lindahl, Freeman-Caddy & Lausterer. Serving Saunders County, NE since 1893, this business law office is dedicated to helping your company take actions that will fuel economic growth. To learn more about their firm and their experience, visit them online. Speak with a lawyer by calling (402) 443-3225.