Your company may be a target for acquisition, or you may be contemplating a merger. Commonplace as both of these are, there can be pitfalls if you are not careful. It is vital that you work with a Massachusetts mergers and acquisitions attorney to ensure that the process and goal are within the law.
Mergers and Acquisitions Distinguished
In a nutshell, a merger occurs when two companies agree to combine their assets and liabilities. Generally one company is, in effect, absorbed into the other, and shares are converted into those of the surviving entity. For example, during the 1980s a large pharmaceutical company merged with SmithKline. The result was that the stocks of the non-surviving company, Allergan, became SmithKline stocks. Interesting to note is that not many years later Allergan re-emerged as a separate company.
Acquisitions generally occur when one usually much larger company purchases a majority of shares in another, thereby “acquiring” it. The acquiring company takes upon itself all the assets and liabilities of the other. Approval by shareholders is necessary in most cases.
Asset Purchase
Another way of acquiring a business is to purchase a majority of its assets without buying its stock. The acquiring business in this way avoids taking on the debt and liabilities of the other. There are distinct disadvantages to this method, however. Speak with a Massachusetts mergers and acquisitions attorney for more details.
Possible Pitfalls
As noted, one pitfall for companies that either merge with or acquire others is that they often take on unknown legal liability issues and substantial debt. If the acquiring company is very large, or the number of competing businesses small, there is also a potential that the Federal Trade Commission will question whether you are violating anti-trust laws. Your Massachusetts mergers and acquisitions attorney will make sure that your acquisition agreement is written to avoid such a pitfall.
If you are contemplating a merger or acquisition, you need an experienced law firm in your corner. Call Massachusetts merger and acquisition attorney David Ionson for a consultation at (781) 674-2562.
