If you are thinking about merging your company or acquiring another to expand your business, it is best to consult a skilled attorney about the next best steps to take. Generally, your attorney and the target’s attorney will work together to memorialize important details into a definitive agreement.
At Sparks Law, our legal team will work with both parties to negotiate and hammer out a document addressing the business combination. Whatever your situation, a New York mergers and acquisitions lawyer should be involved for the best chances of success.
Mergers and acquisitions (M&A) are business combinations in which two companies come together as one (a merger), or a larger company absorbs a smaller one’s operations (an acquisition).
An M&A can occur between two companies in a similar industry—for instance, direct competitors joining forces is called a horizontal merger. An M&A can also occur between a company and a large customer or supplier to gain strength in an industry, called a vertical merger.
The transaction is a conglomerate if the companies are not in the same industry and merge to diversify business.
When acquiring a business, the buyer can complete a stock purchase or asset purchase. A knowledgeable New York attorney can further explain these options in the M&A process.
A stock purchase involves the target company’s shareholders, who must approve the sale of their corporation. In exchange for their shares, they receive an agreed-upon price, shares in the new company, or a combination of both. The acquirer receives all the company’s assets and liabilities.
Asset purchases involve the acquirer buying the company assets, not the liabilities, and paying the company, not shareholders. A shareholder vote is usually only necessary if the assets sold represent more than 50 percent of the company. Talk to an experienced M&A lawyer to learn about viable options for a business combination in New York.
Like in all purchases, the buyer wants to pay the lowest price while the seller wants to receive the highest. In an M&A, the parties must value the target company before the deal can be finalized. This is usually done by comparing past transactions or assessing comparable public companies’ valuations. Also, the parties can use the discounted cash flow method based on future cash flows of the target. A skilled local attorney at Sparks Law could advise parties throughout the M&A valuation stage.
The companies take different forms after a merger or acquisition. A large company could acquire the assets and liabilities of a smaller one, after which the smaller company no longer exists. Assets might include real estate, a customer base, intellectual property, and cash. Liabilities may include debts and lawsuits.
The companies could agree to a subsidiary arrangement, in which the acquired company functions under the acquiring parent company. Alternatively, the companies can choose to consolidate and form an entirely new combined entity. Because M&As are often complex business deals, an experienced attorney should be involved early in the process.
Merger and acquisition attorneys often help identify suitable targets for a client. An attorney can also explain the transaction’s tax benefits. Other actions an M&A attorney at our New York office can handle include:
This list is not exhaustive, and a savvy M&A lawyer will assess the unique situation and tailor their actions to the potential business combination at hand.
Deciding to sell your company or acquire another one is just the first step in achieving a successful business combination. There are many other steps along the way, including detailed negotiations, valuations, and contracts.
Whether you want to diversify or grow your business, or are ready to divest and retire, call Sparks Law and speak to a New York mergers and acquisitions lawyer. We are here to represent your best interests and help you achieve your business goals.
