Mergers and acquisitions involve the consolidation of two or more businesses. Some examples of mergers include the purchase of assets, hostile takeovers and tender offers. Mergers and acquisitions can be used as a growth strategy for all businesses involved. The following is a basic overview of the four stages of mergers and acquisitions.
Perform due diligence
The first step is for the buyer to perform their due diligence. This means their financial and legal advisors will review the financial and legal records of the business they wish to merge with or the business assets they wish to buy. They are looking for contingencies that could negatively affect the merger.
Execute the necessary contracts
The second step is for the buyer’s legal advisors to negotiate a contract with the seller. The contract should address the risks the buyer and seller will make based on information collected in the due diligence phase. Some examples of these contracts include stock purchase contracts or asset purchase contracts.
Perform closing duties
The third step in the merger and acquisition process of closing. Through closing, each party to the contract will have to perform per the terms of the agreement to close the deal. For example, government authorization may need to be sought, payments may need to be made or stock certificates may need to be delivered.
Fulfill post-closing obligations
The fourth step in the merger and acquisition process involves post-closing duties. These are duties the parties have even after the merger is complete. Some examples include fulfilling non-compete or non-solicitation obligations. Not every merger has post-closing duties.
Mergers and acquisitions are legal processes
Ultimately, mergers and acquisitions are legal processes with rules that must be followed to combine businesses. These are complex procedures and mistakes made along the way could lead to delays or undo the deal altogether. It is important that those wishing to undertake a merger know their roles and duties, so the merger is successful.