Mergers and Acquisitions
There are a wide range of regulations and legislation that relate to mergers and acquisitions. Many of them are to do with ensuring that staff and shareholders rights, during either process, are not damaged and the wider issues of fair competition in the market are maintained.
Mergers and acquisitions are an important part of the wider commercial and financial legal sector. When a company takes over another company and establishes itself as the new owner it is called an acquisition. You are strongly advised to instruct a solicitor to advise you on this whole area.
Mergers are where two companies decide to come together as one to form a new company.
There are two main types of acquisitions.
The buyer buys the shares of the target from the shareholders. As the buyer is buying the shares in the target company, it is effectively buying the company. On acquisition of all the shares, they then get all of the target company’s assets, liabilities, rights and obligations.
In this case, the buyer buys assets from the target company. This provides the buyer with the ability to choose which assets it wants to buy and leave those parts of the target company it has no interest in.
There are numerous legal issues to consider in the process of an acquisition or a merger which may occur at any stage. These legal issues need to be dealt with carefully, as there can potentially be large repercussions on your business if it goes wrong.
An important part of the process to consider is the due diligence stage. This is the process of acting on all of the liabilities associated with the purchase of the new business, as well as verifying that all the claims made by the vendors are correct. This includes proof of ownership of all assets or liabilities included, examining records of all commercial and employment contracts, as well as details of any legal cases that may be occurring. It is basically like examining a used car you may be considering buying. You want to make sure that everything from the bodywork through to the engine is as specified and sound.
Merger and acquisition deals
When considering the terms of the deal you should seek confirmation from the individuals you are dealing with. The target business should provide assurance in writing, which is known as the warranty. It is also important to know that the seller can fully reimburse you in certain situations, which are called indemnity.
There are also complex issues surrounding any mergers or acquisitions between companies from different countries.
rhw’s Commercial Team can advise on this area as well as all the other legal issues surrounding the whole merger and acquisition sector. For other areas where we can help you be sure to check out our business & commercial law pages.