The end results of mergers and acquisitions are similar. Where once there were two companies, now there is one. Because of this, there is often a pairing of, or confusion related to the two terms.
The distinction between the two is important but subtle and easy to misunderstand.
Acquisitions
An acquisition occurs when a much larger company buys out a smaller one. The smaller company becomes a part of the acquiring company, which takes over its assets and operations. Though the branding of the smaller company may remain, from a legal point of view it ceases to exist as a separate entity.
Mergers
A merger is a mutual agreement by two companies to combine into one entity. From a legal point of view, the two companies no longer exist after the merger takes place, and only the combined company remains. Instead of keeping either company’s name, the new company may either combine the names of the old companies or come up with a completely new name with no relation to either names of its predecessors.
Some people think that the difference between a merger and an acquisition is that the former is friendly while the latter is hostile. However, this is an oversimplification. Yes, a merger can only happen when the two companies are on good terms with each other, but there are also acquisitions that are mutually acceptable to both parties. Nevertheless, it is also possible for a larger company to acquire a smaller one over the objections of the owners of the company targeted for acquisition.
A Houston mergers and acquisitions lawyer can help business owners in the following ways:
- Clarify business objectives.
- Identify legal issues which vary depending on factors like whether the deal is friendly or not so friendly.
- Build a plan for the merger or acquisition from start to finish, including a timeframe.
- Provide guidance on negotiating the deal.
- Conduct valuable due diligence to avoid costly or risky decisions.
- Discuss tax implications and if they require unique structuring of the new entity.
- Assess regulatory obstacles and address any approvals that may be needed.
- Assist with negotiating the agreement, signing, public announcement, and closing the deal.
- An M&A attorney representing the target business of an acquisition will help them decide whether to negotiate, refuse the buyer’s offer, sell, or investigate a deal with another company.
If you are a party to an acquisition or merger, it is wise to seek legal advice sooner rather than later. The mergers and acquisitions attorneys at Quadros Migl & Crosby have the breadth and depth of experience to provide the valuable guidance you need and to mitigate risk as you move forward with your business venture. Please call or contact us today to set up your initial consultation.