“Mergers and acquisitions” generally refers to the consolidation of companies. A merger occurs when two companies combine to form a new company, whereas an acquisition is the purchase of one company by another with the acquired company becoming part of the acquiring company. Because mergers and acquisitions can be complex business transactions that involve multiple parties and multiple issues, it is important to have the sound legal guidance of an experienced merger and acquisitions attorney.
From start to finish, the Charlottesville business law lawyers at MartinWren, P.C. can help with the structuring, negotiation, and documentation to close a merger and acquisition deal. Our team of highly skilled attorneys collaborates to ensure your entire transaction is handled thoroughly, efficiently, and effectively. This includes exploring tax-efficient deal structures, regulatory approvals, real estate valuations, preparing employee benefits, financing, intellectual property due diligence, and resolving any antitrust concerns.
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In a merger and acquisition, the business players are referred to as the “acquiring company” or the “acquirer” and the “target company” or “target.” The acquiring company approaches the target company to present the opportunity for combining the two companies. The classification of the merger and acquisition is viewed from the perspective of the board of directors of the target company and is based on the endorsement of the parties’ management. For example, a merger and acquisition is labeled as “friendly” when the target company board of directors endorses the merger or acquisition of title. In a friendly merger or friendly transaction, the board negotiates and accepts an offer. But a merger is referred to as “hostile” when the target board of directors objects to a takeover offer. A hostile merger or hostile takeover is one in which the board of the target firm attempts to prevent the merger offer from being successful.
Merger and acquisition transactions are usually conducted through either a stock purchase or an asset purchase. In a stock purchase, the acquirer provides cash, stock, or a combination of the two in exchange for the stock of the target company. Shareholder approval is required for a stock purchase. Target shareholders are taxed on the gain, and the acquirer assumes the target’s liabilities. In an asset purchase, the acquirer buys the assets of the target company, paying the target company directly. An asset purchase may not need shareholder approval, and the acquirer likely avoids assumption of liabilities.
Additionally, depending on the relatedness of business activities of the parties to the combination, a merger and acquisition can be referred to as a:
- Horizontal merger: companies are in the same line of business and often competitors;
- Vertical merger: companies are in the same line of production (e.g., supplier and customer);
- Conglomerate merger: companies are in unrelated lines of business;
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Mergers may be motivated by a number of different things, including an opportunity to create value through growth, an increase in market power, or acquiring unique capabilities or resources. The motives for a merger are influenced in large part by the particular stage of the industry’s lifecycle. The current need for capital or resources, the degree of competition and number of competitors, and both internal and external growth opportunities may motivate companies to explore the possibilities of a merger or acquisition.
If you or your company is considering becoming party to a merger and acquisition, please contact Gregory M. Johnson, a Charlottesville Mergers and Acquisition attorney at MartinWren, P.C., at (434) 817-3100. The highly experienced attorneys at MartinWren, P.C. provide comprehensive legal services to fully handle your business issues, and we welcome the opportunity to help you pursue your company’s best interests and find continued success.
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