To create a single structure and merge several companies into one business, legislative acts provide a reorganization procedure, which is carried out as a merger or acquisition. On the international market, such transactions are called M&A transactions, resulting in the business reaching a qualitatively new level.
What do the companies accompanying the transactions do?
As part of supporting M&A transactions, assistant companies perform the following tasks:
- But, first, let’s develop a strategy.
- We will find and assess the goals for a merger or acquisition and select an object for the transaction.
- We will conduct Due Diligence – a comprehensive study of a company acting as an object of an M&A transaction.
- Let’s evaluate the assets and her business.
- We will prepare the documents for the transaction and its implementation, and the legal consulting – team will be in touch.
- We will monitor and evaluate the results of the transaction.
It is best to turn to experts in such a matter to avoid difficulties and errors in the documentation.
What does the M&A procedure mean?
A merger or acquisition is one of the forms of business reorganization. During the merger, a new company is formed from the other two; there are two options: the companies are merged into one new one and completely cease to exist, or the assets of two different companies merge, and the firms themselves are not liquidated after the procedure.
During a takeover, a legal entity interested in buying a new business acquires more than a third of the shares in the authorized capital of the absorbed company, which continues its development as long as it has other shareholders. Often, an acquisition can turn into a merger.
Types of Mergers and Acquisitions
There are several types of mergers and acquisitions:
- Horizontal, in which two identical firms with the same business merge. This process reduces competition in the market.
- Vertical, in which companies do business in the same industry and have a similar specialization. This usually results in a new monopoly.
- As a result of a mixed merger, companies from different industries are merged.
A takeover is when one company buys a major share in the share capital of another company.
When merging, the new legal entity already has specific rights and obligations that the company received from each participant in this procedure. Sometimes a merger acts as an alternative to liquidation.
But with proper management of the merger, this is an excellent tool for business development, as a result of which the assets of enterprises are combined, and the shares of their founders in the new company are distributed.
Advantages and disadvantages of absorption
As a result of the acquisition from the new company:
- Market positions are growing due to entering new regions (if it absorbs legal entities from the other areas), and the range of services and the client base are increasing.
- A combination of technologies, personnel, and resources positively affects the business.
- There is a need for stricter control over the actions of acquired companies.
However, the absorption process also has disadvantages:
- Often there are conflicts among the founders.
- High costs for the implementation of the procedure.
- Loss of profitable customers and quality of service.
There is a risk of leaving qualified employees and changing the internal corporate culture.
The business owner must clearly understand whether he needs it and whether the game is worth the candle.