Last Updated: October 21, 2024
Mergers and acquisitions are often referenced by the media with the acronym of M&A. However, few people understand what M&A deals entail. Our SC business attorney is here to help you understand M&A transactions and protect your interest in the context of the law.
M&A Basics
Mergers occur when two businesses combine operations. Acquisitions are exactly as they sound as they involve one company acquiring another. M&A law encompasses joint ventures, minority investments, and partnerships.
Your merger or acquisition transaction will require in-depth analysis through due diligence. The negotiation of a price and terms of the deal dictate its financial success or failure. An attorney will guide you through this process including the execution of a purchase agreement. In total, a merger or acquisition deal has the potential to take several months.
Legal Activities in M&As: The NDA
An NDA is an acronym used to refer to a non-disclosure agreement. NDAs are legal documents agreed to by a buyer and seller. Such agreements are a form of protection that empowers parties to share data with limitations. The NDA is necessary for a merger or acquisition as it reveals important information that must be known as a component of the due diligence process.
M&A Letter of Intent
In the context of a merger or acquisition, the letter of intent, or LOI for short, constitutes a non-binding contract. Buyers give the letter of intent to sellers to express interest in a potential deal.
The letter of intent precedes the formal offer for an acquisition. Most letters of intent include a period of exclusivity, a structure for the proposed deal, and also a purchase price range.
Due Diligence
The aforementioned due diligence process is an onerous yet necessary task. Lean on your business law attorney to conduct due diligence and you’ll be able to focus on what you do best. The due diligence process involves an investigation and analysis of the targeted business. The overarching aim is to validate the figures and facts to move forward with the acquisition.
In addition to your business law attorney in South Carolina, the assistance of financial professionals will also be necessary to complete the entirety of the due diligence process.
Deal Structure: Stock Sale vs. Asset Sale
M&A transactions take the form of mergers, asset sales, and stock sales. Stock sales are those in which the acquired business’s shareholders sell shares to the acquirer. The acquired company then becomes a fully owned subsidiary of the purchaser.
Alternatively, asset sales are those in which the business to be acquired sells most or all of its assets to the purchaser. Such sales typically occur when companies dissolve. Proceeds from the sale are then paid to the shareholders.
Learn More During a Consultation With Our South Carolina Business Attorneys
The merger and acquisition process is intimidating and confusing. This is not a road to travel alone. Reach out to our South Carolina business law attorneys today for guidance in the form of an initial consultation.