Mergers and Acquisitions
Mergers and acquisitions are two different ways of structuring the purchase and sale of a business. In a merger, two companies merge their businesses and create a new company. For an acquisition, one company buys another one. Although the two are often paired together, mergers and acquisitions create significantly different rights and liabilities. In a merger, the purchasing company assumes all liabilities of the purchase. Theses liabilities include, criminal penalties and tort liabilities incurred prior to the merger. In an acquisition, the liabilities depend on whether the sale is an asset purchase or a stock and equity sale. In an asset sale, a buyer purchases some or all of the company’s assets and liabilities. Assets may include anything that the business owns, including inventory, equipment, vehicles, machinery, land, leases, copyrights, and other intellectual property. In a stock and equity sale, the buyer purchases the company’s ownership interests and takes on all liabilities and debts, even if the buyer was not aware of them at the time of purchase. It is very important to conduct due diligence before entering into an agreement to acquire a company.
Mergers and acquisition are very complex and often involve business brokers, investment bankers, appraisers, attorneys, accountants, consultants and other professionals. They can take months to complete depending on the structure of the transaction, applicable legal requirements, approvals needed, conditions on the sale, and whether the acquisition is hostile or friendly. The parties can speed up the process by compiling all necessary documentation beforehand and employing experienced advisors, including experienced business lawyers, to facilitate the transaction. Mergers and acquisitions can be intimidating, with complex procedural and legal requirements. Relying on experienced business attorneys can help ensure the transaction is successful and as smooth as possible.