Mergers and acquisitions are complex business transactions that allow businesses to acquire, sell, or combine into new entities. Often these allow entrepreneurs to unlock the value of the business that they have built by selling it. These structural changes allow businesses to change size for strategic reasons. They may appeal to companies looking to grow or downsize, change direction, or strengthen their position within an industry.
Mergers and acquisitions have slightly different definitions. A merger refers to the combination of two companies of similar size into a single business entity. An acquisition occurs when one company buys another company (or most of its assets and combines it with its existing business.
There are a variety of different types of mergers and acquisitions transactions, including:
- Horizontal mergers, in which two companies that operate in the same or similar industries (and are possibly competitors) combine into one company
- Vertical mergers, in which a company combines with its customer, supplier, vendor, or some other entity on its supply chain. Vertical mergers allow companies to take a greater stake in whole industries.
- Conglomerates, which usually happen when an entity wants to diversify its assets among multiple, unrelated industries.
- Acquisitions of substantially all of the assets or all of the equity (stock or membership interests) of another company for strategic growth
Mergers & Acquisitions of Equity or Assets: Purchase
Companies looking to purchase another company or acquire its assets follow several steps on the buy-side of the mergers and acquisitions process. They formulate a strategy that works with the business’s original business model. This strategy guides the development of a list of potential acquisition candidates. After a list has been generated, businesses can begin the process of evaluating the valuation and operational efficiency of potential acquisition candidates. This due diligence process should determine whether the combined value of the entities will result in a value-add for the original company. Once the due diligence process is complete, companies may move to begin negotiating the terms of the deal.
Mergers & Acquisitions of Equity or Assets: Sale
Selling a business means saying goodbye to the product of years of work. The sale of a company is an enormous financial and often an emotional event, and it may be the only time an owner ever engages in the mergers and acquisitions process. A sale of assets or stock allows the founders or other owners to unlock the value of years of hard work, and reward employees and partners who have been part of the team. On the other hand, a sale of equity or assets also creates new liabilities and indemnification obligations. Therefore, advice from an experienced mergers and acquisitions attorney is particularly essential on the sales side.
Mergers & Acquisitions of Equity or Assets: How We Can Help
Payne & Fears’ business transaction attorneys have considerable mergers and acquisitions experience. Our clients come from both the buy-side and the sell-side, representing a broad spectrum of business sizes and industries. Throughout the mergers and acquisitions process, our attorneys offer practical advice and adept representation geared toward maximizing business and economic growth. We regularly assist clients during the early stages of an acquisition, whether by negotiating the structure of the deal, preparing a letter of intent or term sheet. Other services we provide include:
- Negotiating the purchase of entities
- Negotiating the sale of entities
- Negotiating asset sales
- Negotiating merger agreements
- Conducting due diligence investigations
- Drafting Purchase and Sale Agreements and ancillary documents
- Closing deals
Issues raised in mergers and acquisitions can be complex. We pride ourselves on providing straightforward and practical advice to clients concerning the structure of deals. Working together with clients, we help to minimize the risks and maximize the rewards associated with mergers and acquisitions.
Mergers & Acquisitions of Equity or Assets Experience: Buy-side
- Represented a private equity-backed medical device company in several acquisitions of medical device and diagnostics companies
- Assisted with the acquisition of an international after-market automotive products manufacturing company
- Negotiated multiple office building acquisitions by a China-based purchaser
Mergers & Acquisitions of Equity or Assets Experience: Sell-side
- Negotiated the sale of a medical software-as-a-service (SaaS) company to a large healthcare company on favorable terms
- Represented the seller of a large advertising agency to a private equity firm
- Assisted with the merger of a developer and manufacturer of a new technology used by the military, security forces, and the FBI into a private equity-backed defense contractor
- Negotiated the successful sale of an unmanned aerial vehicle technology company to a major aerospace contractor
- Handled the sale of a multinational automobile engine manufacturing company
- Negotiated the sale of a domestic bicycle manufacturer to an international sporting goods company
- Negotiated the sale of a commercial printing company
- Assisted with the sale of a medical billing software and service company to a Fortune 100 corporation
- Negotiated the sale of a high-end photography products manufacturer in a management buyout transaction
For more information on our mergers and acquisitions work, please contact Richard K. Zepfel.