The complex legal challenges of mergers & acquisitions require the expertise of an attorney.
Defining mergers and acquisitions
Mergers and Acquisitions (M&A) are when two or more companies combine operations. Mergers are two or more companies becoming one, and Acquisitions are when one company purchases another.
An example of an m&A agreement
For example, a mobile, wireless company may have 50 locations and wants to grow. The owners may decide to purchase stores from another company i.e. an acquisition. When four restaurant owners go together to form one new company you would have a merger.
Explaining the process
In the process some important points will be raised:
Deal Structure. Three alternatives exist for structuring a transaction: (i) stock purchase, (ii) asset sale, and (iii) merger.
Cash versus Equity. How will you fund the venture with cash or borrowing from lenders or trading ownership interest.
Working Capital Adjustments. Each business must determine the effect on operations and day to day management and funding.
Escrows and Earn-Outs. At the closing monies will be reserved (escrowed) to cover expenses agreed by the parities. In other situations, the parties will pay from earnings.
Representations and Warranties. These points are very important in terms of disclosures and what happens if information was not accurate.