Mergers and Acquisitions
By KOMAL SINGH AT LEXCLIQ
Mergers and Acquisitions:
Mergers and Acquisitions are (M&A) are transactions in which the ownership of companies, their business organisation or other operating units are transferred or consolidated with other entities.
Mergers and Acquisitions can allow a enterprise to grow or downsize and change nature of their business or competition positions.
From legal point of view mergers is a legal consolidation of two entitles into one
Whereas Acquisitions occurs when one entity takes ownership of another entities stock, equity interest or assets.
Specific acquisition targets can be identified through myriad avenues including market research , trade expos, sent up from internal business units or supply chain analysis.
If we see the types :
In the Acquisitions it can be characteristics for legal purposes as”assest purchases” in which the seller sells the business assets to buyers or “equity purchases” in which buyer purchases the equity interests in targeted company from one or more selling shareholders.
When it comes to merger types one hybrid form often employed for tax purposes is a triangular merger, where the target company merges with a shell company.
If we study on documentation:
Documentation on M&A transactions often begins with a letter of intent. The letter of intent generally does not bind the parties to commit to a transaction, but may bind to a parties to confidentiality and exclusivity obligations so that the transactions can be considered through a due diligence process involving lawyers, accountants, tax advisors and other professionals as well as business people from both sides.
Representation and warranty by the seller with regard to the company, which are claimed to be true at both time of signing and at time of closing .
Covenants : which governs the conduct of the parties, both before the closing and after the closing.
Termination of rights which may be triggered by breach of contract a failure to satisfy conditions.
Mergers are partly differentiated by Acquisitions by they financed and partly by the size of the companies.