A merger happens when two separate business entities come together to form one. Typically one of them survives and the other ceases to exist as a result of the combination. An acquisition involves the sale of assets or ownership of one business entity to another and the seller may or may not continue to exist. There are significant and different tax, economic, operational, and liability issues depending on how the deal is structured.
The first step is usually signing a mutual confidentiality and non-disclosure agreement. Then perhaps an exchange of basis business and financial information, followed by the start of negotiations.
Agreement on price and payment terms is only the start. Ideally there will soon be a non-binding letter of intent as to the basic parameters, followed by a comprehensive definitive agreement. Among the points to cover:
– Are there assets or business units the buyer does not want?
– Are there known or potential claims and liabilities that the seller must give protection against?
– Do all of the seller’s employees keep their jobs? On what terms and conditions?
– How much time will it take to analyze financial and business records, and what exactly should be examined?
– Do any customers, suppliers, landlords, banks, or government agencies need to consent to or approve any aspect of the deal, and what happens if any of them refuse?
– Does the seller’s owner want a role in the new company?
The process can be stressful and often unpredictable. We have the experience to make it work.