Mergers may provide business owners with opportunities to become part of a much larger organization. As noted by the U.S. Small Business Administration, mergers involve two or more separate companies combining into one new entity.
Many businesses, however, discover that the merger did not prove as beneficial as expected. Differences in pre-merger operations may hamper a smooth transition into a new post-merger company.
Mergers may require detailed agreements
Pre-merger enterprises have their own management teams with specific skills to carry out their unique missions. To achieve the hoped-for outcomes when combining companies, the involved parties may need to create a merger agreement.
An agreement generally outlines terms that the new merged entity’s management must follow. It may include details regarding objectives and how shareholders expect management to fulfill its purpose. Agreements may also describe the exchange of assets and inventory for stock shares in the new company.
How an acquisition may work for a business
Unlike a merger, an acquisition often results in one business buying out another one that then ceases to exist. As noted by Business.com, owners intending to grow their enterprises may buy another company from an owner who wishes to walk away from it.
Often referred to as a “friendly” acquisition, the current owner agrees to sell his or her business to the buyers in expectation of a good price. Hostile acquisitions, however, involve “taking over” a business when its owner does not wish to sell. Because of the refusal to sell, an acquisition may require legal documents such as a non-compete or non-disclosure agreement from the former owner.
When businesses with similar resources combine into a legal entity, they may streamline their resources. The resulting merger may include improved operations and increased profitability. Acquisitions may often require detailed negotiations for the parties to reach favorable agreements.
If you are considering a merger or have begun proceedings it is imperative that you speak with an experienced Houston mergers and acquisitions attorney to help you through the transition and to minimize risk for future litigation. The attorneys at Quadros Migl & Crosby are ready to help. Call us at (713) 300-9662 or contact us online to set up your initial consultation.