Starting and expanding a business is one of the most prized skills in America today. Oftentimes, in order to avoid the legal hurdles of these formalities, companies will simply combine rather than start a brand new division, or they will outright purchase another company to avoid start-up pains. Whether you are considering an offer or making one, mergers and acquisitions are one of the most crucial moments in the life of your business as a valuation is placed on your years of hard work and growth.
Before you embark on this journey, you should first consult an Atlanta mergers and acquisitions lawyer at Sparks Law. Our knowledgeable attorneys can guide you through the process and help you make intelligent business decisions to reach your goals.
In a merger, two companies come together to form a new entity and both sides retain decision-making power. On the other hand, in an acquisition, one company takes over the second (usually a smaller company being taken over by a larger company) and retains the decision-making power.
In a merger, both sides will still have stock in the company and decision-making power. Mergers are typically friendly since it is a mutual decision between companies to come together for growth in market share. The four main types of Mergers are:
In each of the above scenarios, the focus is on expanding both businesses together in a way that neither business could accomplish independently. When a business is capable of expanding independently, an acquisition may be considered.
Acquisitions are much more common in today’s Market Place. While the process and relationship can be friendly between the acquiring company and the acquired company, they typically are not. The two types of Acquisitions are:
Acquisitions typically occur as Stock Purchases or Asset Purchases. Stock purchases are more simple because the acquiring company is only purchasing shares, while Asset Purchases can be more complex because the acquiring company acquires everything.
Lawyers are necessary on both sides of a merger and acquisition to provide a smooth transition. The first step is to draft a Letter of Intent listing out the Due Diligence.
Due diligence is an extensive process where attorneys will help value the company based on assets, stock, and potential for future revenue. This ensures that the buyer is getting what they are paying for – the ability to generate revenue in the future.
If both parties are satisfied with due diligence, then your Atlanta mergers and acquisitions lawyer will provide an initial draft of the final contract, merger, share purchase, or asset purchase agreement. These agreements may include various provisions, such as:
After due diligence is completed, both parties will review and amend the contract, and a date to reach a decision will be decided. At this point, negotiations may begin, which is the most crucial part of the process to ensure a favorable situation is reached. This can be as simple as redlining a few clauses in an agreement for a merger, or detailed communication between attorneys. When final negotiations have been made and both parties agree to the proposed contract, they sign the contract and the post-closing process begins.
It is critical to work with a skilled Atlanta business lawyer when drafting merger and acquisition documents, as there may be financial consequences for any errors in the negotiated terms between management.
A merger or acquisition can be very beneficial for your business. Whether it be technology advancements, acquiring key leaders, expanding market reach, operating capacity, or just plain cash flow, mergers and acquisitions create new possibilities for companies that did not exist previously. Not to mention the valuation placed on a company after a merger or acquisition often exceeds the values of the businesses separately. These advances can allow a company to launch itself years ahead of where it would’ve been on its own.
Mergers and Acquisitions are one of the most important times in the life of a business. The biggest challenge in this process is getting a correct and fair valuation of the company and making sure that you handle negotiations for a favorable settlement. Having an experienced Atlanta business attorney to help you through the process is crucial to your success.
To make sure that you receive quality legal help, call an Atlanta mergers and acquisitions lawyer today. Sparks Law has been helping several Atlanta business owners complete mergers and acquisitions for nearly a decade. Contact us today if you have any questions or need help getting started.