Laws on Mergers and Acquisitions

If you are considering a merger or acquisition of business it could be complicated. These could include documents that are several pages even if you have a small business with a small agreement. Mergers and acquisitions can be appealing for the small business owner, especially when this means an introduction to a new market. The combining of companies can be complicated and a lot of work. This means it’s important to involve a highly trained attorney in the process.

Combining Companies Through a Merger

The true definition of a merger is when two companies combine their assets and liabilities to become one. Typically the company that has more shares is known as the “surviving” company. The “non-survivor” is the company that is considered the weaker arm and the company that will take on shares of the larger company to survive. The finances and legal aspects of both companies are important to safeguard during this process and the larger company may still choose to rename the company in an effort to create a new atmosphere and new meaning for the business.

Shares, Assets and Liabilities

One company may purchase the shares of the other, which means that this company becomes what is known as the “target company”. This means that the smaller company becomes what is known as a subsidiary. This is similar to the meaning of a “surviving” company takes on the assets and liabilities to help the other company survive. However, if the target company is publicly traded, the other company can attempt to buy it out which is referred to as a “hostile takeover”.

Even if shares are not being purchased, asset purchases will require approval from the shareholders of the company. The company that is acquiring the other will need to take the time to change the name of anything in their bank account over so that everything becomes one. This process takes time and must be done carefully.

Mergers are monitored and governed by state and local laws to ensure that everything is done properly and in order. This is handled by the U.S. Department of Justice and the Federal Trade Commission to avoid a monopoly. Mergers and acquisitions can be complicated. It is important that you have hired an experienced attorney in the area of mergers and acquisitions for your unique case.

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