In the highly competitive free market, it’s difficult for a business to survive on its own. Every good business owner has to pay attention to where the market is flowing and expand or change to meet it. Sometimes, this isn’t always possible for a business to do on its own. Sometimes a company with the capital to make a change doesn’t have the time or experience to change its business model well enough or fast enough. To help with that, a business can join with another business of similar size and worth with a similar problem in a merger. Or your business can purchase another business with the resources you need in an acquisition.
In either case, employees, resources, intellectual property, and real estate property all need to be properly taken care of and accounted for in a merger or acquisition. If everything isn’t taken into, account partners, clients, and employees can be slighted or hurt, necessitating them to take legal action against your business and the merger or acquisition as a whole.
The corporate law attorneys at Tressler & Associates can help you figure out if the merger or acquisition is a good idea, what types of mergers and acquisitions are available to you, and how to best proceed with one.
A merger is specifically when two businesses, or firms in legal terms, come together to form one firm with one company stock. Rather than be two separate entities with different owners, the percentage of ownership is split between the shareholders and/or stockholders. The acting board of directors typically gets reshuffled as well. In the end, a merger results in a new company.
Before deciding whether your business should enter a merger or acquisition, take stock of what your business wants, what it can afford, and what it needs. A merger needs to meet all of these requirements, and an attorney can help you confirm whether you can go through with a merger or acquisition. Your accountants can tell you if your business can afford a merger, and your business minds should know if your business needs a merger. An attorney can tell you if your business wants a merger, and if it can be in one.
What your business wants isn’t always so simple. You may have contracts like shareholder/stockholder agreements and founder’s/partnership agreements that dictate a business’s goal or fiduciary duty. When this is the case, you can’t always go against them. If your business’s goal is to succeed independently, you may not be allowed to merge. This can lead to your shareholders, stockholders, board of directors, or employees stopping you from completing a merger. An attorney can help you either get around this, prepare for this, or legally change your fiduciary duty.
An acquisition works differently than a merger in that one company’s pre-existing company stays, and another is absorbed. One company will buy out more than 50% of another company’s shares. With this percentage, they can make decisions about and for the newly acquired company, its assets, IP, and property without approval from the other shareholders.
Similar to when a business should enter a merger, a business needs to know several things to justify an acquisition. It’s all about the business’s wants, what it can afford, and what it needs. With an acquisition, what the business wants and needs isn’t too different from a merger, but what it can afford changes drastically.
In an acquisition, your business is fronting the cost, whereas, in a merger, the cost of doing business is shared. This means that the business’s fiduciary duty may be affected differently than in a merger, necessitating an attorney’s assistance. You may not be allowed to dip below a certain market value, use so much of the corporate savings account, or make such an expensive and large expansion all at once.
Having an attorney who keeps track and handles all of your contracts will make these issues possible to handle.
There are five types of mergers and acquisitions that are separated based on two things: what industries the merging businesses belong to and what kind of businesses are merging.
A merger or an acquisition may be key to your business’s survival. When you want your business to live long and prosper, you have to be able to keep all of your options open. Having an attorney who has a record of all of your business contracts, your fiduciary duties, and contacts for mergers and acquisitions, can give you options. Contact the corporate law attorneys at Tressler & Associates to make sure your business has every option for success that it can.
If you are in need of legal services, our team of experienced attorneys is here to help! If you need a lawyer now or are just in need of general counsel, we are happy to discuss your needs with you.