Mergers and Acquisitions in California

The key principle behind buying a company is to establish shareholder value over and above that of the sum of the two companies. The reasoning behind mergers and acquisitions is that two companies together are better than two separate companies. This reasoning becomes captivating to companies when times are rough. Financially healthy companies will act to buy other companies in order to create a more competitive and cost-effective company. Target companies will usually agree to be purchased when they know they can’t survive on their own and both companies will come together hoping to gain a greater market share. A Duncan Law can counsel you during a merger and acquisition to make sure you make the best decision that benefits you and your company.

Most of the time mergers and acquisitions are mistaken as synonyms, but the terms mergers and acquisitions are slightly different. An acquisition happens when a company takes over the other and clearly establishes itself as the new owner. Your Duncan Law will explain to you that legally speaking, acquisitions mean that the target company will no longer exist.

A merger happens when two companies, usually about the same size, agree to combine and continue as a single new company rather than to remain as two separate entities. Both companies surrender their stocks and a new company stock is formed in its place. If you think that a merger will benefit your company, seek counsel from Duncan Law.

Ideally, a merger would find two equal companies coming together as one. However, in practice, usually, one company will buy another and allow the acquired firm to claim that the action is a merger of equals, even when it’s technically an acquisition. If you are looking to make this part of your deal, contact Duncan Law. Being bought out often has negative significance, thus both companies try to make the takeover more acceptable by claiming it as a merger.

Calling a purchase either a merger or an acquisition is determined by whether the purchase is friendly or hostile and how it is announced. The real difference lies in how the purchase is announced and received by the board of directors, employees and shareholders.

From the perspective of Duncan Law, there are different types of mergers. The types of mergers are a horizontal merger, vertical merger, market extension merger, product extension merger, and a conglomeration.

A horizontal merger happens when two companies that are in direct competition and share the same market merge. A vertical merger happens when a company and a supplier merge. A market extension merger happens when two companies that sell the same product in different markets merge. A product extension merger happens when two companies selling different, but related products in the same market merge. A conglomeration happens when two companies that have no common business areas merge.

Mergers and acquisitions can be intimidating and complicated, but with the help of Duncan Law, the process can be made easy. Contact Duncan Law | Duncan Tax to find out how our expert lawyers can help you during your merger or acquisition.


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