Mergers and acquisitions are part of a complex legal landscape, and it is crucial to keep up to date on the relevant laws. For instance, any changes to tax codes could have a significant impact on a potential business combination. There are also many new M&A strategies that could be beneficial in securing the success of your combined company. To learn more about the trends in this area of business, speak with a knowledgeable attorney at Sparks Law today.
One new legal development in the arena of M&As is that it is crucial to get the seller’s key employees on contracts with non-compete clauses and other restrictive covenants. This is key in effectively purchasing a company without risking losing business to its employees.
Another trend in mergers and acquisitions is what is called a stock swap. This means that part of the purchase price for a company will be paid in the larger company’s stock. For example, let’s say that a large corporation is going to buy another company. The corporation might offer some of their stock as part of the purchase price.
The smaller company could sell all their shares in exchange to own part of the corporation. Additionally, the corporation’s value would increase because they now own the smaller company. This is a great way to guarantee the success of both companies after the merger or acquisition. The seller is also incentivized to continually increase the value of the company they sold or merged, since they now have stock in the company.
It is likely that Biden will change the tax code, and a large part of tax savings for business owners comes from the capital gains tax rate. If the special rate is removed, business owners could be taxed up to the top tax bracket, which could drastically change the amount of money that a seller makes off a merger or acquisition.
This is a major future change that potential sellers should be aware of. Say that a million-dollar business is taxed at a new rate of 39% rather than the previous special rate of 21%. The seller would lose $180,000 because they waited until after the tax code changes to close the deal.
At Sparks Law, our skilled M&A lawyers could advise business owners on these and other legal trends that could affect their financial future. It is crucial to stay informed on this area of law, as legal changes could have a huge impact on your business and potential combinations with other companies. Let our experienced attorneys guide you through the recent developments in the world of mergers and acquisitions. Give us a call today to learn more.