What are Mergers and Acquisitions?
The term Mergers and Acquisitions (M&A) is defined as the fusion of companies or organizations to form a single business entity. Two entities combining to create one is identified as a merger, while acquisitions would describe a business taking over and absorbing another organization. Companies use mergers and acquisitions to maximize profits, optimize productivity, and expand operations. Delaware Mergers and acquisitions may take place when purchasing or exchanging shares and assets. Mergers can rise from entities within the same, similar, or completely unrelated industries.
Should you hire a Delaware Mergers and Acquisitions Lawyer?
A large percentage of mergers and acquisitions end in failing to improve the bottom line of the companies involved. It’s not surprising that companies which had solid legal representation hosted a more favorable outcome. Mergers and acquisitions are not something you should do on your own. The reasons for hiring a lawyer during mergers and acquisitions may include:
Legal Complexity of M&A’s
There are many layers of legal complexity and implications in a Delaware merger or acquisition. Knowing and exercising them with a lawyer may put you in a position to avoid the pitfalls, save money, make gains. Knowing the shortcuts, and understanding the loopholes. |
Merging with a foreign company
If you’re merging with a company under a different legal jurisdiction, it could propose a slew of legal matters to consider. A Delaware mergers and acquisitions lawyer may act as your parachute on this business venture. |
Tax implications
When merging or acquiring another company—the tax rates may depend on the resulting entity type, legal jurisdiction, and corresponding tax structure. A good Delaware mergers and acquisitions lawyer can help you figure out how to get the best possible tax outcome for your merger or acquisition. |
Complex forms and paperwork
A merger or acquisition produce the need for relevant paperwork— like forms on taxes, entity formation, restructuring, stocks, assets, membership, bylaws, regulations, and possibly many more. A Delaware mergers and acquisitions lawyer can help you complete all the paperwork and avoid any negative legal implications from not having the appropriate forms and documents. |
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Types of mergers and acquisitions
The types of mergers and acquisitions include:
Market-extension Merger
As the name implies, a market-extension merger depicts two businesses that sell the same thing but to different markets. |
Product-extension Merger
A product-extension merger is the opposite of a market-extension merger; this is a merger of two companies that sell different things to the same markets. |
Conglomeration
A conglomeration is a merger between companies that sell different things to different markets—having completely different business areas in both consumer base and products offered. |
Horizontal Merger
A horizontal merger gets described as a fusion of two comparable organizations that compete with each other in the same market with similar products or services. |
Vertical merger
A vertical merger consists of two companies in direct relation to each other as a supplier and distributor, consolidating into one company that can not only distribute the product but also produce it themselves. |
Congeneric Mergers
Congeneric mergers are when two businesses provide different products or services to the same target market or consumer base. |
Purchase Mergers
Purchase mergers occur when one company buys out another. This merger allows for the sale and acquired assets to be tax deductible, among other tax benefits. |
Consolidation Mergers
A consolidation merger is when two companies are bought and combined under one new entity. |
Benefits of Mergers and Acquisitions
The benefits of mergers and acquisitions include:
Market/Geographic expansion
Companies operating in a different market or geographical area combine to expand their physical reach and consumer base. |
Product or Service development
A business could increase the amount and types of products it offers by uniting with another company. |
Improved technology and staff
Merging with a company that has patented technology or skilled employees may improve operations and productivity, while possibly offer new products or services. |
Increasing brand power
Merging could increase a company’s brand potential, flexibility, reach, and influence by merging with another (preferably one with an excellent reputation and marketing strategy). |
Mergers of Organizations; Corporations, LLC’s, Non-profits
Businesses can fully and completely integrate their programs, functions, and membership by merging or consolidating. On occasion, two organizations will want to combine their functions to expand their outreach to the individuals or groups they serve. A merger involves one of the organizations dissolving and the other organization taking over the assets and responsibilities while a consolidation involves both organizations dissolving and creating an entirely new entity. The decision to merge or consolidate is based on legal, tax, or economic concerns, and usually it is a combination of all of these factors.
The law imposes strict fiduciary responsibilities on members of an organization’s governing body to ensure that it is in the best interests of the business. Directors and officers may be held personally liable if they fail to act prudently and with due diligence. It is also important to remember that when merging entities are tax-exempt under different classifications, the resulting merged entity will generally need to file a new application for federal tax exemption with the IRS.
Mergers and acquisitions of organizations are complex processes that require the approval of the boards of directors and membership of each organization, and a plan of merger or acquisition must be presented to each organization and its members. In addition, federal antitrust laws prohibit mergers or acquisitions that may substantially lessen competition in any line of commerce—including nonprofit organizations. An organization should have legal counsel review the impact of a proposed merger or consolidation due to the complex legal issues that may arise.
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