Legally, a merger occurs when two entities become one. An acquisition occurs when one entity acquires another’s assets or its debts and equity (stock). Mergers and acquisitions (M&A) can function as an exit strategy or expand a company’s operations.
If you are considering a business combination with another entity, you need a Florida mergers and acquisitions lawyer to advocate for you. These complicated deals include negotiating, conducting due diligence, and drafting specific agreements such as a letter of intent. At Sparks Law, our skilled attorneys can also inform shareholders of their right to vote on a merger or acquisition and handle stock transfers.
A horizontal merger usually involves two companies that operate in similar industries and may even compete for business. A vertical merger usually involves a smaller company and a larger one, such as a manufacturer and the company providing its packaging or producing a component of a larger product. A conglomerate involves diverse players from different businesses.
Shareholders who own a target corporation must agree if the company is subject to a stock purchase. The acquirer must pay shareholders a negotiated price per share for their stock, which could include an exchange for stock in the new company. The acquirer now owns all the shares in the old company, and along with this comes all assets and debts or other liabilities, such as ongoing lawsuits.
For an asset purchase, the acquirer pays the company, not its shareholders, for the assets and does not incur the liabilities. On the other hand, a stock purchase would involve heavy regulatory duties for this change of hands. Shareholders usually must agree to an asset purchase if more than 50 percent of the assets are sold.
One form of acquisition is a hostile takeover, which occurs when the target company’s management opposes a business combination with the acquiring company. Florida has enacted two statutes governing the actions in a hostile takeover, the control-share acquisitions, and affiliated transactions statutes. The first action is the tender offer, where the acquirer gains voting control. Florida Statute §607.0902 gives shareholders some say in this process.
The second step is for the acquirer to squeeze out any shareholders who do not tender their shares, although Fla. Stat. §607.0901 ensures that squeezed-out shareholders are paid fairly for their shares. Anyone considering a merger or acquisition should consult an experienced local attorney to help negotiate the best share price and comply with Florida’s corporate statutes.
An acquiring company needs to know how much a target is worth to ensure both parties are receiving a fair deal. Management, accountants, and an attorney might compare similar acquisitions or study valuations for similar companies that are publicly traded. Another way to value the target is the discounted cash flow method, which predicts future cash flows of the target. An M&A attorney could work with management and accountants to appraise a Florida company.
A company that acquires another’s assets but not its stock might choose to continue its previous operations or assimilate the assets and close the business. In a stock purchase, the acquired company could cease to exist or be run as a subsidiary of the parent company.
In a consolidation after a merger, the companies form a new company built from the two former ones. Florida business owners interested in M&A should contact an experienced attorney at Sparks Law to further discuss.
If you decide to sell or merge your company or acquire another one, there is much work to do before signing the definitive agreement. At Sparks Law, a Florida mergers and acquisitions lawyer could negotiate on your behalf, provide necessary documents, get you through due diligence, and ensure all legal requirements are met. Call us today for your initial consultation.
