The views of this article are the perspective of the author and may not be reflective of Confessions of the Professions.
Mergers are a common occurrence in the business world, in which two different entities become a single entity whether that be through consolidation or transfer. This typically happens after one company buys a significant amount of stock in another company, essentially absorbing it into their own operations. This can be a great boost to both companies, as it combines their resources and abilities in order to reach farther within the industry or market they operate in. If your company is considering a merger with another company, it’s essential to understand the legal process that’s involved.
The CEOs or other senior executives of the two companies involved will handle the negotiation process. This includes disclosing all pertinent information about their business, including such things as financial information, intellectual property, customer base, how the company is managed, and what contracts they possess. After revealing all the data, the two companies will negotiate who will own what percentage of the new company. Both companies will also need to agree on a management structure for the new company. It’s essential to have a clear idea of what you want before beginning negotiations. Otherwise, you may end up with a deal that’s not in your best interests.
After the terms of the deal have been negotiated, the boards must approve directors for both companies. The board of directors is responsible for representing the interests of shareholders. They need to ensure that the merger is in the best interests of the company and its shareholders.
Once the board of directors has approved the merger, both parties will draft and sign a formal agreement. This agreement will outline the terms of the deal and how the two companies will operate after the merger. It’s essential to have a corporate litigation attorney review this agreement before signing it. It will ensure you understand all of the terms and that they are in your best interests.
After the signing of the agreement, the due diligence process will begin. This process is when both companies will investigate each other to ensure everything is as expected. They’ll look at financial records, employee contracts, and any outstanding lawsuits. This process can take weeks or even months to complete. Both companies will also need to obtain approval from their shareholders during the due diligence process to complete the merger.
Mergers are complex proceedings with many facets that need accounting. If you’re going through a merger or considering one for your business, ensure you understand the legal process. It’s essential to have a clear idea of what you want before beginning negotiations and to have a lawyer review any agreements before signing them. The parties can finally complete the merger once the due diligence process is complete.