What You Need to Know About Mergers and Acquisitions in California
By Eric H. Milliken, At Sutter Law Firm, San Francisco’s premier business law firm.
There is a lot of legal assistance that is required in any merger and acquisition (M&A) deal especially if the idea is to increase the shareholder value over and above the sum of the two companies separately. This reasoning especially becomes attractive for businesses when times are tough and the future looks uncertain.
In any case, getting experienced legal representation during this process can help achieve the main goal of M&A i.e. of increasing shareholder value. This is because M&A require deep legal understanding of the company’s goals and operations as well as of the laws pertaining to combining two businesses in California. Your company needs a legal negotiator who can ensure that not only are all M&A laws being followed but that your rights are being protected as well. This is true whether you are the financially healthy business owner agreeing to merge with another company or whether you are the struggling company hoping to survive by aligning yourself with another company. Having experienced legal counsel will also help keep your investors happy. San Francisco and Silicon Valley investors want to ensure that their best interest will be represented throughout the merger or accusation.
Probably the first thing to understand about M&A is that mergers and acquisitions are two terms that are not synonymous but mean slightly different processes. The example just quoted comes under the category of acquisition where a financially healthy company entirely takes over a struggling startup or other company. The former company legally establishes itself as the rightful owner while the latter company ceases to exist. On the other hand, mergers happen when two companies of the same size or two competitors agree on combining their business and start operating as a single entity rather than as two separate ones. Stocks of both companies are surrendered and a new legal entity is formed in its place.
Whether it is a merger or acquisition, your M&A expert business attorney in San Francisco California can advise on which option is best for your business and shareholders. Normally, one firm buying out another firm has a lot of negative significance which is why your legal advisor may still suggest calling the process a merger even if it’s technically an acquisition.
Mergers are also of different categories: horizontal merger, vertical merger, market extension merger, product extension merger, and a conglomeration. A horizontal merger happens when two competing companies in the same market merge together. A vertical merger takes place when the supplier of a company merges with the company itself. A merger involving market extension happens when two companies of comparable sizes doing business in two different markets come together. A product extension merger is a process in which two companies selling different but comparable products in the same market merge together. Finally, a conglomeration is when two businesses with nothing in common merge together for economic or purely business reasons.
While it is true that M&A are complicated and intimidating, they can also offer a lot of growth opportunities and can expand your professional and business horizons. Make sure you get in touch with a legal firm, that can help you achieve this by ensuring a smooth M&A keeping your interests and rights in mind.
If you would like to setup a free consultation with an experienced business attorney, please reach out to us at Sutter Law.