Mergers and Acquisitions

No matter the industry or the size of the company, mergers and acquisitions are a common way that businesses evolve. Companies who are actively acquiring a new entity, considering an acquisition of a targeted company, or looking to restructure their organization through a merger are greatly benefited by highly skilled legal team to represent their interests.

Thrift & McLemore regularly assists clients in acquiring businesses throughout the United States and foreign countries. We also work directly with clients to smooth the process of selling of parts or all of their businesses to bring about successful resolution to the transactions.

Our aim is to always apply creative and rational strategies to our legal counsel and representation to maximize our client’s value and move them to a position of strength within the transaction. This allows our clients to have greater advantages in their merger or acquisition, whether they are looking to buy, sell, lend, or work as an intermediary.

Our attorneys work to counsel and provide legal representation for companies of all sizes and stages of the merger/acquisition process. Transactions range in size from under $50,000 to over $10 million. Our team of professionals enables us to provide superior service to clients who regularly buy and sell businesses, or clients engaged in a once in a lifetime transaction.

There are a wide range of reasons that companies choose to take part in mergers and acquisitions, which can provide tangible and intangible benefits:

  • Financial benefits
  • Operating benefits
  • Sharing and reducing of risk
  • Growth
  • Increased market power
  • Corporate tax savings and tax incentives
  • Issues within a company’s business, market or product lines
  • Retirement
  • The ability to acquire needed resources, such as labor, customer lists, etc.
  • Acquiring patents or tech that is unpatentable
  • Trademarks and copyrights
  • Business methodologies
  • Brand recognition
  • Improving brand image and brand value
  • Employee non-compete agreements
  • Diversification

Mergers and acquisitions are highly distinct from one another, though both ultimately result in two or more business entities being consolidated into one. Negotiations and the process of consolidation into a single entity is a major event for each company involved, and the transactions have a deep impact on all stakeholders involved, from the owners and management teams to employees, all the way down to the customers.

Ideally, legal representation is brought in once a merger or acquisition is being considered. At the beginning stages, when companies are first beginning to explore their options or potential merger/acquisition transactions, companies may want to consider drawing up a confidentiality and non-circumvent agreement. Sellers may also find great benefits in attaining legal representation, and the creation of a business broker engagement agreement can be highly beneficial for sellers looking to set their terms early in the process.

Mergers

A merger occurs when two or more separate entities combine to form a single company. There are five common forms of mergers:

  • Conglomerate
  • Horizontal
  • Vertical
  • Product extension
  • Market extension

Merger of Equals

A merger of equals is rare, which occurs when two or more entities have no designated company acquiring the other(s). During a merger of equals, the merged companies will share equal, or close to equal, board representation once the new board has been established. When a merger takes place, the stockholders of each original company surrenders their shares and exchange shares for those from the newly merged company.

Since true mergers of equals are so rare, what usually occurs is one of the companies acquiring another. In these cases, the entities may choose to view and refer to the acquisition as a merger instead, which can be a way to show deference to the management of the acquired company or can be used as a marketing tactic to improve the success of the new company.

Acquisitions

An acquisition occurs when one company, the acquirer, purchases another company, which is the target. Acquisitions can be highly complex and take on a number of forms.

There are two primary ways that an acquisition takes place:

Stock Purchases

Stock purchases occur when the acquirer purchases the shares of the target company from the target’s shareholders. When this occurs, the acquirer then takes on all of the target company’s assets and liabilities. Stock purchases can be highly complex legal procedures, which are aided by the involvement of a strong legal team. While there are a number of factors that impact stock purchases, or purchases of other equity, Thrift & McLemore’s professional team is highly experienced and able to provide guidance and legal representation for companies looking to acquire stock and target companies in the process of being acquired.

Asset Purchases

Asset purchases occur when the acquirer purchases some or all of the target company’s assets. Examples of assets that an acquirer can purchase include a target company’s stock, equipment, vehicles, facilities or inventory. Not all of the assets need to be purchased for an acquisition to take place, and the acquirer has the option to choose which of the target company’s assets and liabilities they desire to take on. The ability to choose which assets and liabilities are acquired is the primary reason that asset purchases are often considered more advantageous to the acquirer than stock purchases.

Our legal team works with each client to go over the benefits and risks of each type of acquisition and which would best suit the client’s particular needs and position in the market.

Additional Legal Considerations

Mergers and acquisitions can take occur for public and privately traded companies at any stage of the business life cycle and can become a highly challenging and stressful event if handled incorrectly. Mergers and acquisitions are also not always a choice made by all participating entities, and Thrift & McLemore has experience representing the interests of companies coming together to negotiate for mutual benefit, as well as companies who are facing hostile acquisition or defending themselves against another company attempting to takeover.

Legal Considerations include:

  • Due Diligence regarding each company’s tax information, corporate governance documentation, operating information, capitalization schedules, contractual rights and obligations, personnel and labor relations, payroll and employee benefits, physical properties and intellectual property rights, customers and venders, as well as additional industry considerations
  • Corporate Governance, which requires the seller to share its documents related to incorporation, bylaws, shareholder materials, previous deals and locations of operation, policy manuals and corporate codes, financial information, etc.
  • Antitrust involved the proposed transactions in mergers and acquisitions that will affect commerce in the domestic market.
  • Taxation can often play a significant role in mergers and acquisitions due to the tax implications for each company, and tax attorneys play a larger role in structuring the transaction process to reduce unnecessary tax burdens and create tax-preferred structures.

By structuring the transactions for our clients and working to maximize the amount of leverage that our clients have throughout the negotiation process, we work diligently to represent our client’s best interests—both in the short term to address their immediate needs, and to meet their long-term goals through each phase of the transaction.

For more information or to schedule a consultation regarding Mergers and Acquisitions, contact us directly at our Atlanta or Kennesaw offices.

 

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10.0Craig Thrift
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