Mergers and Acquisitions 101: What you need to know before the sale

Acquisitions and Mergers can be a daunting experience, unless you have the right lawyer on your side.  Having good legal representation makes a very large difference in how well the transactions go. A lawyer that is well versed in acquisitions and mergers will make the process much smoother.  Here is a 101 guide to mergers and acquisitions, what you need to know before the sale.

Two companies that are combining is completing a merger or acquisition. When two companies merge, they are typically the same size, and they then become one enterprise. In an acquisition, one company takes over the other.

There are three types of mergers, horizontal, vertical and conglomerate.  A horizontal merger is between two companies that are in the same industry. They may or may not be competitors.  A vertical merger is between two companies, such as a supplier and customer.  In a vertical merger the acquiring company is attempting to consolidate its position in the industry.  In a conglomerate merger, two companies in two different industries, merge.

There are two different types of acquisitions.  One is a stock purchase acquisition.  In that acquisition, the company that is acquiring, pays the stockholders, and is then responsible for all of the assets and liabilities.  There may even be liabilities that the company is not aware of, and they are now responsible for them.  In this type of acquisition, the cash is preserved for the company.  Also, in a stock purchase acquisition, the acquirer does not have to worry about negotiating because the contracts contain anti assignment clauses.

The second type of acquisition is an asset purchase.  This type of acquisition is where the company only purchases the assets that it wants.  This type of purchase will protect the buyer from any liabilities.

Asset purchases are more common than stock purchases.  When determining payment, it is usually cash, or taking on certain contract liabilities.

When dealing with these complex mergers, and acquisitions businesses need a lawyer that they trust, to review all of the documents before signing.  You need to make sure that you work with a lawyer that has a lot of experience, and will take the time to review all of the information with you.  You need to get what the company is worth, and do the research on that.  By hiring the right lawyer, you will make sure that your interests are protected.  You don’t want to go into this type of business deal alone.  Having a knowledgeable lawyer by your side will make it work out much better for you in the end.  There are many different aspects to the transactions that the lawyer can walk you through.

When you need a lawyer to help you with a merger or acquisition make sure to call Bovarnick and Associates. They have many years of experience working with companies that are completing acquisitions and mergers.  They are located in the greater Philadelphia region for your convenience.  They are reliable, and will walk you through the transactions every step of the way.  Make sure to reach out to them to retain their services, no matter how big or small your merger or acquisition is.

by Robert M. Bovarnick

Rob Bovarnick is a graduate of the University of Miami School of Law. Prior to starting his firm, he was Vice Chair of the Bankruptcy Group at a 170 lawyer firm and head of the Creditor’s Rights practice at a 20 lawyer firm. He is the former Chair of the Eastern District of Pennsylvania Bankruptcy Conference.