Mergers and acquisitions: how to acquire a company

Mergers and acquisitions (often including mergers & acquisitions called) are important transactions in business law. They result from strategic decisions made by companies to promote growth, expand market share, gain competitive advantage or reduce costs. 

Legal merger

A merger is the legal amalgamation of two or more legal entities into one new legal entity. This means that the rights and obligations of the merging companies are combined within one legal entity. The legal entity under which the companies are jointly continued is called the acquiring legal entity. The others are called the disappearing legal entities: they legally cease to exist. Legal merger is regulated by law and counts as a transfer by universal title. Those who shareholder are of one of the merging companies, automatically become shareholders of the acquiring company. 

Acquisition of shares

On the other hand, an acquisition is the transfer of control of a company to another party, usually without changing the legal personality of the company. The acquired company legally continues to exist and retains its rights and obligations, but falls under the control of the acquiring company because the acquiring company has become the (sole or largest) shareholder. This acquisition is not specifically regulated by law. It does not need to be, because it is basically the purchase agreement between the selling shareholder and the buying shareholder. In practice, two forms of this takeover occur: the friendly takeover and the hostile takeover. 

Aspects to the transaction

When considering a merger or acquisition, it is important to know that there are several legal considerations to take into account, including the structure of the deal, the terms of sale and the responsibilities of the parties. A well-prepared deal ensures that all parties are better protected and reduces the risk of future conflicts.

Structure of merger or acquisition

The structure of the deal is one of the most important aspects of the merger or acquisition. This includes how the transfer of ownership and control occurs and the resulting legal obligations. In a merger, for example, shareholders of the disappearing companies receive shares in the acquiring company, whereas in an acquisition, shareholders of the acquired company usually receive cash.

Terms of sale on acquisition of shares

Another important consideration is the terms of sale, such as the sale price, the division of responsibility for any losses and the obligations of the selling party after the transfer. This is where the help of an attorney is very valuable, as they can help draft an agreement that takes into account the interests of all parties.

Responsibility after merger or acquisition

Finally, a merger or acquisition should consider how responsibility for any mistakes and damages will be divided. Who is liable for any damages resulting from the merger or acquisition can be included in the agreement with the help of an attorney. 

Conclusion

In general, mergers and acquisitions offer companies a number of opportunities to grow and compete, but it is important to carefully consider the legal aspects to avoid any conflicts. Contact the corporate law attorney at Lexys Attorneys at Law to make your merger or acquisition a success.