Merger and acquisition (M&A) are interchangeably used in the business world and may seem to be the same for the average layman, but in reality, they slightly differ from each other.
Acquisition is when one company (buyer) purchases another company (seller) and clearly establishes itself as the new company owner. Legally, the sold company would cease to exist, and the buyer absorbs anything that is related to the sold company.
Merger is when companies, usually of the same size, both agree to enter into a partnership with the decision to go forward as a new company. Companies involved in mergers still remain separately owned and operated by the original business owner though.
If you find your company as an M&A target, here are some things that you should keep in mind before signing on that dotted line.
Research and Due Diligence
Not all M&A processes push through. Research and due diligence are requisite processes for any negotiation between companies. They are not obligated to push through with the M&A if they uncover issues that they don’t agree with.
If you are at the receiving end of the M&A process, it would be in your best interest if you make sure that all of your documents are in order before agreeing to begin the negotiation process.
If you are planning to sell your business, you should have your company valuation on hand before entering an M&A negotiation. Generally, an investor would closely examine more than one factor when it comes to valuation.
These could include the hard facts and figures on how your company is doing from a financial perspective as well as possible future outlook.
One of the most common worries during M&A negotiations is its effect on the current workforce of the smaller company. Realistically, massive layoffs or downsizing may occur; however, this can also be included in the negotiations.
Overall, M&A can be pretty tricky and getting a corporate law attorney to help you out would be your best option for success. Let our attorneys at New York & New Jersey Law Firm help. Contact us now.