When to Hire a Business Attorney for Mergers & Acquisitions

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Mergers and acquisitions are the legal consolidation of two or more companies. Merging is the combining of two companies to give rise to one new company while acquisition is the taking over of one company by another company. By merging together to form one company, it is believed that the individual companies will be creating more value compared to their combined value when they individually stood.

There are different types of mergers and acquisitions in the United States. The merger can be through absorption or through consolidation. In absorption, two or more companies merge into an existing company with all the other companies except once lose their identity while in consolidation, two or more companies merge together to form a new company with all the companies losing their identity.

Alternatively, mergers can be classified into vertical, horizontal or conglomerate. In horizontal, the mergers take place between firms which are in the same industry while vertical mergers take place between companies which are in the same industry but different production stages or value chain. A conglomerate on the other hand is the consolidation of companies which are in unrelated industries.

Reasons for mergers and acquisitions in the U.S

Mergers help to improve a company’s performance and accelerate growth. By merging resources and workforce the resulting company’s performance and growth will be better than that of the two parent companies combined.

Economies of scale- by increasing the level of production as a result of merging the two companies, there is a significant increase in the savings in costs of operation of the new company.

To increase market share and positioning giving broader market access. Merging two or more companies will boost the market share of the resulting company and this results in a broader market access.

Tax considerations- the new company’s total tax paid at the end of the year, will be less than that paid by the two original companies. This is a great way of saving on the tax paid to the relevant bodies.

Why hire a lawyer for Mergers and Acquisitions

Because of the precarious nature of the M&A process, it is imperative to always hire a business attorney to facilitate the merger and legally document the same. Without a business attorney, disputes can easily arise in future concerning the equal sharing of the resources, shares and even employment spots in the new company.

With a business attorney present though, the contract negotiation process will be easier and there will be no disputes in future as everything is documented in writing. Here are some of the roles played by an attorney during an M&A process;

Role of a business attorney in the M&A process

Identify the legal issues and implications of the M&A

It is the responsibility of the attorney to identify the legal issues and implications of the merger between the two or more companies. These legal implications and issues vary depending on factors like whether the deal is friendly or unfriendly.

Advise on deal and negotiating tactics

It is up to the business attorney to offer legal counsel and advice to the client on how to negotiate for a better deal from the M&A. Irrespective of the fate of the client’s company, it is up to the business attorney to ensure that his/her client always gets the best possible deal.

Determine the tax implications of the new company

Once two or more companies have merged, the tax structure of the resulting company will be a little bit different from the original structure. It is the responsibility of the attorney to determine the tax implications and come up with a new tax structure for the new company. Depending on the attorney’s qualifications, they can either work in conjunction with tax attorneys to come up with a new tax structure or do the entire job on their own.

Obtain third-party consents from lenders or parties to other contracts

The attorney will also be tasked with obtaining third party consents from any lenders or parties to the contract concerning the merger. The attorney will personally have to contact all these relevant parties and get their word on whether the process can proceed or not.

Negotiate agreement, sign, announce publicly and close the deal

Once all the parties have consented to the deal, the attorney will then proceed with negotiations and once an agreement has been reached, he/she will facilitate the legal documentation of the deal and signing of the deal by the relevant parties.

From the roles of the attorney in the M&A process, it is clear that an attorney must be present for the process to smoothly proceed and here at Toppins Law Firm, we are giving you the best business attorneys in the business to help you with merging of companies. Give us a call today and hire our attorneys for the best and fairly priced legal services in Houston.