What Are The Essential Stages Of Merger And Acquisition Under Corporate Law?
Merger and Acquisition refer to the assets of two companies intending to increase profit, to increase competitive advantage as well as increase market shares. A merger is an act in which a company can absorb or merge with another company. Whereas Acquisition refers to the process when one company holds the major power or stake in the target company or organization, but the name and legal structure of the company will remain the same and permanent. This article will discuss the entire process of merger and Acquisition.
What Are The Reasons For Merger And Acquisition?Increases supply chain power: As per the corporate law assignment help professionals the Buyer, a supplier and distributor, is referred to as a vertical merger. Buying a supplier and distributor helps in the reduction of the cost, and it also helps in the easy distribution of products.
Eliminate competition: Merger and acquisitions deal with eliminating future competition and acquiring a huge market share.
Synergies: When two or more companies merge, the efficiency of companies increase, and at the same time, the cost reduction is seen because each company has rights towards the new company to manage the company and contribution of capital.
Growth: Merger leads to the growth of the organization. This allows the acquirer organization to grow its share.
Surviving: It is challenging for companies to survive in the long run. So, during the financial crisis, the only option left with the companies is to either merge or acquired to survive in the long run.
Merger and Acquisition are two corporate strategies that deal with buying and selling different companies. The accomplishment of the merger and Acquisition depends on strategies followed by the company, given below—
1. Merger and Acquisition Strategy Process
Following is the strategy process in which the company deal with:
Determination of business plans
Finding out financial constraints
Developing a summing up a profile of the acquiring company
Preliminary valuation
Review and approve the strategy
2. Target identification strategies
The steps in target identification strategies are:
Identify potential segments
Developing a list of targets
Growing a Business by merger or Acquisition
Prioritize targets
3. Information Exchange
After the initial stages, when both parties have agreed with the transaction, the next process of the documentation process. This process includes submitting a letter of intent in the transaction and signing confidentiality of information to ensure that the proceedings of the deal.
4. Valuation and Synergies
After sharing information, an assessment of the target and the deal as a whole is done. The seller tries to determine the price of goods that would result in shareholders gaining from the deal.
5. Offer and Negotiation
After evaluation, the offer is given to the shareholders of the target. This step requires a lot of time, and at the same time, it is very complex. There is competition among the buyer to offer better prices when the business or entity being targeted is attractive.
6. Due Diligence
After the acceptance of an offer, the due diligence process by the buyer starts. This includes a review of target entity including products, financial books, customer base human resource etc.
7. Purchase Agreement
In the next step, draft the agreements that outline the cash or stock given to target shareholders.
8. Deal closure and integration
After the purchase agreement, both parties have to close the deal by signing the document, and the buyer acquires the target company.
Conclusion
In an era of high competition due to globalization, merger and acquisition activity has increased. The law students are expected to have an in-depth understanding of the corporate law fundamentals. For any support or assistance, they can take Brisbane assignment help, where the law experts will help students understand the essentials.