Maybe you’re a business owner whose company is humming right along, all cylinders firing, prospects look good. Or maybe your company is facing increased competition, higher costs, and lower profits that hinder growth and expansion. Either way, another company or investor may approach with a merger or acquisition proposal. What factors should you consider if your company faces this dilemma?
Merger vs. Acquisition.
A merger is when two companies join together, even if one company has made the first move. Typically, a new company will be created with all or part of the original companies included.
An acquisition is similar. When one company acquires another company, the company that was acquired (the target company) no longer exists. Acquisitions can happen by purchasing stock, by purchasing assets, and through a merger.
Reasons to Consider a Merger or Acquisition Proposal.
Whether to accept a proposal, of course, depends on the terms of the proposal. After all, you’ll want to get something from this transaction. This type of deal can be lucrative now and in the future, with some business owners using a merger or acquisition to step away from their company.
- The new company or pumped up company (acquirer) may be more valuable than previous company or companies.
- Goals for a new company may lead to greater savings and greater revenue.
- An acquiring company may obtain staff, skill sets and facilities easier than if starting from scratch.
Since there are different types of mergers, you may find that one better suits your company over another.
- Product extension merger. Two companies selling related products merge to expand their markets.
- Conglomerate merger. This involves two companies that sell different products or operate in different markets.
- Market extension merger. Two companies that well the same product, but in different markets, merge to get a larger market and client base.
- Horizontal merger. Direct competitors merge – same products, same markets.
- Vertical merger. Customer and supplier merge, which can avoid an adversarial relationship.
Facing a Merger or Acquisition? Schedule an Appointment.
Corporate law is complex, especially when it comes to mergers and acquisitions. The attorneys at Virtus Law, PLLC, have the tools and experience help you protect your company’s future. To schedule an appointment, call us at 612.888.1000. Although located in Minneapolis, we serve clients throughout Minnesota including communities like Edina, Mendota Heights, and Red Wing.