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.
Defining Mergers & Acquisitions
Mergers and acquisitions are an important part of the wider commercial and financial legal sector. An acquisition is where one company takes over another company, with both companies retaining their legal existence after the transaction.
A merger is where two companies combine to form one new company.
There are two main types of acquisitions. Share Purchases and Asset Purchases.
The buyer acquires the shares of the target company from the shareholders. On acquisition of the shares, the buyer also acquires the target company’s assets, liabilities, rights and obligations.
The buyer buys assets from the target company. This provides the buyer with the ability to pick which assets it wants to acquire and leave those parts of the target company it has no interest in.
There are many legal issues to consider at each stage of a transaction. You should ensure that you obtain legal advice on each of these issues as a wrong decision can have an adverse impact on your business in the short and long term.
The due diligence process is a comprehensive assessment of each and every part of the the target business, including its financial performance, assets, contracts, obligations and liabilities. Imagine you are considering buying a used car. You want to examine it to make sure that everything from the bodywork through to the engine is as advertised. This is arguably the most important stage of the transaction for the buyer.
Warranties & Indemnities
A buyer will want to negotiate warranties and indemnities from the seller. A warranty is a contractual assurance made by the seller about a particular aspect of the target business. An indemnity is a promise from the seller to the buyer to reimburse the buyer should an identified liability arise.
rhw’s Commercial Team can assist you in this area as well as provide advice on any legal issue in connection with a merger or acquisition. For details on other areas in which we can provide assistance please check out our business & commercial law pages.