Mergers and acquisitions (M&A) are two transition options that allow a company to grow. They can be complex and involve a range of legal aspects that companies need to consider before proceeding. Though the terms are often used interchangeably, they are distinct transactions each with advantages to consider.
Mergers
A merger brings two companies together, and one company ceases to exist after the completion of the transaction. Mergers happen for a variety of reasons. They could allow each company to enter a new market, sell a new product, or offer a new service. Although a merger can offer many benefits to a company, its disadvantages including culture clashes, employee shake-ups and increased liability should also be considered.
Acquisition
An acquisition is a process whereby an existing company purchases and assumes ownership over another firm or asset. It is a complex process that requires careful planning and due diligence. Acquisitions increase market reach, can diversify the business, reduce production costs and enhance market power. However, potential pitfalls should be considered before pursuing an acquisition including employee duplication, conflicting company objectives, and brand damage.
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The legal aspects of M&A transactions are complex and require careful consideration. If you own a business and are looking to grow through mergers and acquisitions, you will need to ensure your company complies with regulatory requirements, contract law, employment law, IP law, antitrust law, and more. The attorneys at Craig, Terrill, Hamm, Grossman & Erwin, LLP are here to help guide you through the process.
