Mergers vs. Acquisitions: Here’s What You Should Know

  • Posted on: Feb 16 2023
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Sometimes companies participate in a merger and acquisition in order to increase the shareholder value over what each company would be separately. This often happens when businesses are struggling. But because M&As require a great understanding of the law as well as each company’s operations and goals, it’s often extremely helpful to find a legal negotiator to protect your business and your rights. 

Regardless of whether your business was struggling before the merge or it is financially well, an experienced business law attorney can help to keep your investors happy. The last thing that you want to do is change the structure of your business and suffer a decrease in shareholder value.

What is an M&A?

Despite often hearing the two terms together, mergers and acquisitions (“M&A”) are two separate things. Mergers occur when two companies agree on joining forces and operating as a single entity instead of as the two separate companies they were. With a merger, the companies’ stocks are surrendered and a new legal entity is formed. Acquisitions generally occur when a financially healthy company takes on (“acquires”) an unhealthy/failing company. The healthy company will establish itself as the owner and the company that is financially struggling will transform into the healthy one, ceasing to exist as it was. It’s important to decide on what makes the most sense for your company and its shareholders. 

Categories of Mergers

There are four different categories of mergers:

  1. Vertical Merger – occurs when a supplier of a company merges with the company;
  2. Market Extension Merger – occurs when two companies of similar sizes that are doing business in two different markets join forces;
  3. Product Extension Merger – occurs when two companies selling different but comparable products within the same market combine; and
  4. Conglomeration Merger – occurs when two businesses that have nothing in common decide to join together solely for business or economic reasons. 

There is no doubt that M&A can be quite intricate and complicated. However, they are often very beneficial and financially lucrative, opening up business opportunities. Still, the most important thing is to work with a business law attorney who can help to walk you through the M&A process, while working hard to maintain your interests. 

The Law Offices of Brian L. Fox, APLC Help those Who Wish to Merge with or Acquire Another Business 

If your California business is interested in merging with or acquiring another business, it’s in your best interest to consult with a qualified California business law attorney who can help. 

At the Law Offices of Brian L. Fox, APLC, we know how important it is to protect your business, its shareholders, and your interests. We will help you to figure out what would make the most sense for you and your company so that you may succeed. To learn more or to schedule a free consultation, contact us today!

Posted in: Business Law