Companies that enter into a merger or acquisition (M&A) agreement hope they will reduce operational costs through combined resources and gain a more significant market share, thus adding to profits. However, these deals are complicated, and you should devote adequate time to reach a successful outcome. Management, lawyers, and accountants are necessary parts of the process from negotiating to closing.
If you have been approached by a larger company or contacted a target, a North Carolina mergers and acquisitions lawyer can help you negotiate, conduct due diligence, value the businesses involved, and draft appropriate documents. Let an experienced attorney at Sparks Law assist in closing a business combination that is suitable for all parties.
Mergers are business combinations in which one company purchases the assets or stock of another, or the companies combine resources to form a third company. Acquired companies can be absorbed or function as subsidiaries to parent companies. Under North Carolina General Statute § 55-11-01, mergers can occur if the parties’ boards of directors adopt a plan of merger and, in most cases, the shareholders agree. A plan of merger must stipulate the first three conditions below and can also stipulate the last two:
Business combinations are an efficient way for the surviving company to gain brand recognition, advanced technology, customer loyalty, and distribution channels. Our experienced North Carolina attorneys can provide guidance throughout the process of a merger or acquisition.
Companies with Securities and Exchange Commission (SEC) reporting duties can rely on a North Carolina lawyer to organize shareholder notifications concerning mergers or acquisitions. Shareholders receive information about the transaction through a Schedule 14A proxy statement or a Schedule14C information statement.
Both schedules explain merger terms, including how much shareholders will receive for their shares after completing the transaction. Shareholders have appraisal rights, which means a dissenting shareholder may challenge the amount each share is worth in a merger or acquisition. The North Carolina General Assembly has set standards for which corporate actions trigger these rights, which shares are subject to them, and what the procedure is for both shareholders and corporations when shareholders demand appraisal rights. The knowledgeable M&A lawyers at Sparks Law are familiar with appraisal rights and can assist clients interested in the procedure.
In an asset purchase, the acquirer does not purchase the target company’s stock from its shareholders. The acquirer instead pays the company for its assets. This type of purchase is common when a stock purchase would trigger federal regulatory duties because a company is changing hands, such as acquiring medical facilities.
Merging corporations have a fiduciary duty to shareholders to get a fair price for the stock. Thus, valuing the companies is a critical aspect of any business combination. Management will work with lawyers and accountants who might compare similar transactions to develop a deal’s structure and figures. They may also use strict accounting tactics, such as the discounted cash flow method. This sophisticated method predicts the target company’s future cash flow. Our local M&A lawyers are experienced in the legal aspects of valuation preceding a business combination.
Companies use mergers or acquisitions to enhance their positions in the marketplace, grow businesses, and add value for shareholders who are the actual owners. If you are considering one of these transactions, it is important to recognize the importance of working with skilled attorneys and accountants throughout the process.
Call Sparks Law today to consult with a North Carolina mergers and acquisitions lawyer before you begin serious negotiations for a business combination. We are here to help you achieve your goals.