Today, the market is very competitive. It is the world of survival of the fittest. If you aren’t proactive and haven’t adapted yourself as per the market, you're sure to be overtaken by the competitors’. Most of the times mergers takes place. A merger is a legal entity when two entities are joined to become one. An acquisition takes place when one entity takes over the other entity. Generally, the assets and liabilities are consolidated whenever a merger and acquisition takes place. When two entities entirely forms a new company losing their independent existence, it turns to a consolidation.
Human Resource -mergers and acquisitions is very common. There are many advantages as well as disadvantages of these acquisitions. When 2 companies merge into one, a lot of savings can occur. For example: If one company has strong capital base and the other company has a brand name in the market, what better than a merger. Both the companies can use their respective benefits for the advantage of their business. An acquisition can be a private one or as a public. A public acquisition has many legal formalities to be followed before becoming one entity. There are structures to it:
The buyer will purchase a large number of share of the firm and will take a control over the company.
The buyer will purchase the asset of the company to a larger extent, controlling it completely. In such cases, the target company becomes an empty shell.
There are certain documents to be followed before getting into these processes:
● Letter of Intent: There is no obligation for any transaction here, but any exclusivity and confidentiality is prevented here.
● Depending upon the structure of the transaction, there must be an agreement. The agreement could be asset agreement, share purchase agreement and merger agreement.
● The conditions in these agreements include the regulatory terms.
● The representation and warranties from the sellers’ side should also be mentioned.
● All these agreements and signatures takes place in front of the covenants.
Hope this article has been informative. There are several forms of dealing with businesses and staying alert is the best way to prevent the business from being acquired by others. If there is too much of competition, merger and consolidation is the best way to rule in the market. Both the parties can make an agreement and the same can be put on papers. Do share your feedback with us and let us know the biggest acquisition that you think have shook the business market.