Mergers, acquisitions, and sales are some of the most complicated events in the life of any business. These deals can be quite complicated, and they must be done correctly if you want to protect your rights and interests. There are also important legal considerations to be aware of to ensure you execute the deal correctly.
If this sounds a bit confusing, do not panic. The California business attorneys at Business Estate & Tax Attorneys, PC have many years of experience helping businesses navigate the complexities of mergers, acquisitions, and sales.
Our lawyers have the knowledge and experience to guide you through a merger, acquisition, or sale while protecting your rights and the interests of your business. If you would like to know more, get an initial consultation by calling any of our four California locations, or you can visit our contact page.
Differences Between Merger, Acquisition, and Sale of a Business
While some people use the terms merger, acquisition, and sale interchangeably, the truth is these are very different legal concepts. There are different timelines and legal requirements for mergers, acquisitions, and sales. There are also differences in how assets and liabilities are handled.
It’s important to understand these differences if you’re going to find the right course of action for your business. We’ve outlined the core differences between mergers, acquisitions, and sales below:
Sales
Of all the ways that a business can change hands, a traditional sale is the most straightforward and easiest to understand. Essentially, one company purchases all of the assets and assumes all the liabilities of another company. The most important factor in a traditional sale is getting an accurate valuation for the business you are selling.
If you are considering selling your business, you want to be sure you get maximum value when you sell to another business owner. If you’re buying a business, you don’t want to pay too much or more than you can afford. Selling a business is typically a faster process than a merger or acquisition, though it can still take several months or longer to negotiate the terms of the sale.
Mergers
Business mergers are different than sales or acquisitions because instead of one company being sold to another, both companies combine their assets to form a new entity. One company in a merger is designated as the “surviving” company, while the other is labeled the “non-surviving” company. As part of the merger, the non-surviving company merges its assets and liabilities into the surviving company.
The surviving company also absorbs the non-surviving company’s practical elements, such as its building space and employees. Another crucial aspect of a merger involves stock. The shareholders for the non-surviving company will need to have their shares converted into shares with the surviving company. Because mergers are more complex deals than a standard sale, they usually take longer to negotiate and complete.
Acquisitions
Also known as a “takeover,” business acquisitions are like sales in that they involve the purchase of one company’s assets by another company. However, unlike in a standard business sale, the company that’s acquiring the other business’ assets intends to keep both companies running in some form. There are two broad ways that one company can acquire another.
The first method is for one company to purchase the other’s assets, but not its stock. This type of acquisition usually means that certain operations of the company being acquired may change, but the ownership structure will stay somewhat similar.
The other type of acquisition involves one company purchasing the shares of another, along with the second company’s assets and liabilities. This turns the second company into a subsidiary of the company that bought them.
Acquisitions are generally amicable, mutual transactions, but sometimes one company will attempt to acquire another without the second company’s full approval. This is known as a “hostile takeover.”
Why You Need a Lawyer for Help with a Merger, Acquisition, or Sale of a Business
A merger, acquisition, or sale of a business is a complex transaction, involving significant sums of money, stock transfers, exchanges of assets, and more. Many things can go wrong with these deals, which is one of the reasons you want a qualified legal team involved from the start.
Here are a few ways an experienced business lawyer can help with a merger, acquisition, or sale:
- Obtaining a proper valuation – Whether you’re the one selling your business or buying a competitor, getting a proper valuation for the business being sold is essential. If the company you’re buying has inflated assets or doesn’t disclose all of its liabilities, you could find yourself in serious financial trouble.
- Reviewing legal documents – You will want a lawyer to thoroughly review the terms of the deal to make sure you understand what you’re getting into. A lawyer with experience in business sales and purchases knows what to look for to uncover potential problems.
- Explaining your options – A qualified lawyer can explain the difference between a merger and acquisition and how they can affect your business.
- Reviewing liabilities – In a merger, the surviving company absorbs the non-surviving company’s assets and liabilities. It is crucial the surviving company ensures it’s not inheriting any liabilities that could hurt the new combined business.
- Evaluating stock – Any business transaction that involves purchasing of stock comes with a raft of potential issues. Determining the correct share price is a tricky process. The shareholders of the company being acquired will want to be sure their interests are protected.
How BETA Can Assist with Mergers, Acquisitions, and Business Sales
If you’re looking for an experienced business attorney to assist with a merger, acquisition, or sale, the attorneys at Business Estate & Tax Attorneys, P.C. are here to help. We’re happy to review the terms of the deal and conduct due diligent to ensure your interests are protected.
We could also help with other aspects of the transaction, such as going over a company’s financial records, making sure the company being bought is valued appropriately, assisting with the conversion of company stock, and fighting back against hostile takeovers. We provide tailored legal strategies that consider your financial interests.
An experienced mergers and acquisitions attorney is essential whether you’re buying a business or selling your own. Get a consultation with one of our knowledgeable lawyers by calling our office or visiting our contact page.
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