What are mergers & acquisitions in California? This is a good question for business owners, executives, and decision makers to ask. There are many types of transactions businesses go through in their lifetime including a merger and acquisition.. A Fresno mergers & acquisitions lawyer can be a much needed resource during this time. A lawyer can provide the necessary legal advice and counsel to properly navigate these transactions.
What a Merger Is
A merger is when two or more companies decide to combine to form a new single entity. All business assets and liabilities will merge into one entity, this is called the surviving entity. The entity or entities being dissolved are known as the dissolving entities. Mergers are commonly completed to gain market share, expand to new territories, reduce operational costs, and unite products.
There are several different types of mergers that can happen. The types of mergers executed will depend on the goals and circumstances of the businesses.
- Conglomerate. This happens when companies merge and have unrelated business activities. They operate in different regions or markets. A pure conglomerate merger happens when the companies have absolutely nothing in common. A merger only makes sense if the companies can create synergy, enhance value, reduce costs, and achieve substantial growth. An example includes the merger between the American Broadcasting Company and The Walt Disney Company in 1995.
- Congeneric. This happens when companies operate in the same market but have overlapping sectors such as marketing, research and development, or technology. Companies can combine to take a new product line from one company and add it to an existing product line of the other, gaining a product extension and larger market share. An example of this could be when Citigroup merged with Travelers Insurance. These were two companies with products complementing each other.
- Horizontal. This happens when companies that sell the same services or products merge. An example of this would be the Sprint and T-Mobile merger.
- Vertical. This happens when companies that sell different products merge. They operate at different levels within a similar industry. Mergers are completed to increase synergies and reduce costs. The AT&T and Time Warner merger would be an example of this.
Even though these specific examples are commonly seen among large corporations, they are important options for small and medium sized businesses to be aware of.
What an Acquisition Is
An acquisition is when one company buys, acquires, or absorbs control of another. This can usually be completed through a purchase of business assets or ownership shares. These are done to take control of or build on the strengths of a company.
FAQs
Q: What Is Meant by Merger and Acquisition?
A: A merger and acquisition is a general term that covers two major transactions. A merger happens when two or more companies combine to form a new entity. The original businesses cease to exist, and the new company is formed and operates as one. An acquisition happens when one company buys or acquires another. It’s usually a large company acquiring a smaller one. Sometimes, these acquisitions can be friendly, and sometimes, they’re hostile. Mergers and acquisitions cover multiple companies forming into one.
Q: What Are the Benefits of a Merger or Acquisition?
A: The benefits of a merger or acquisition can be substantial. Businesses often explore these possibilities in search of a way to promote growth, ensure survivability, and increase market share. All businesses involved can stand to benefit from the increased customer base, reduced costs, and increased geographic reach. Instead of competing against each other and potentially dissolving one of the companies, a merger or acquisition may be a better way to allow each company to contribute to one united business.
Q: What Are the Consequences of a Merger or Acquisition?
A: The potential consequences of a merger or acquisition are that employees could lose their jobs. If companies that have a larger workforce decide to merge, it’s likely there will be resultant job cuts. This is often necessary due to job duplication from the different companies, changes in business models, or increased operational efficiencies. There could also be a loss of control. When two companies come together their overall mission, vision, and decision-making process can be altered.
Q: What Is an Example of a Merger or Acquisition?
A: An example of an acquisition is when the pharmaceutical giant Abbvie acquired Allergan in May of 2020. Abbvie acquired Allergan to gain an even greater market share in the biopharmaceutical industry. It allowed Abbvie to diversify its asset portfolio and gear up for more long-term growth. An example of a merger is when Disney and Pixar merged in 2006. It was considered one of the biggest corporate mergers in history. It helped both companies grow and revitalize animated movies under one entity.
Q: Why Do I Need a Lawyer for a Merger or Acquisition?
A: You need a lawyer for a merger or acquisition because these can be very complex and structured business transactions. A lawyer can help with the negotiation process between the companies, review the legal documentation, and ensure everything is filed correctly with the courts. Whether it’s a merger or acquisition, once it’s completed, it can be very difficult to reverse, so it’s important it’s done right. Going through the negotiating process and signing anything without having an attorney review is a huge risk to the company.
Legal Support You Need
Mergers and acquisitions are sometimes a necessary step in the life cycle of a business. They commonly happen in the corporate world and even within smaller businesses. It’s important for decision makers to be aware of laws and regulations surrounding these types of transactions. California has strict legal requirements and compliance mandates that must be met during these transactions. It’s critical to have an experienced lawyer on hand to help along the way.
At Fishman, Larsen & Callister, our legal team is ready and able to assist businesses through this process. With our trusted legal experience, you can rest assured that you’re getting the quality legal advice needed to ensure this transaction is right for you. We pride ourselves in helping California business owners across the state with their legal concerns. Contact us today at our office conveniently located in Fresno to speak with a member of our legal team.