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MERGERS & ACQUISITIONS
Table of Contents
Mergers and Acquisitions (M&A) refers to merger transactions between companies. Mergers and acquisitions, although used interchangeably, have different legal meanings. In an acquisition, a company directly acquires another company or companies, and a merger takes place in the form of an acquisition. A merger is a combination of companies that later form a new legal entity under a single company name. Assets are not liquidated. A merger takes place within a company or a newly established company.
A company can be valued objectively by examining comparable companies in an industry and using metrics. Mergers and acquisitions can be divided by type or format. With each passing day, companies attach great importance to merger and acquisition processes in order to achieve their commercial goals. Corporate mergers and acquisitions have become essential elements in business life and the economy.
What Are The Merger and Acquisition Types?
The following are some common transactions that fall under the umbrella of mergers and acquisitions:
- Acquisition of Assets,
- Management Takeovers.
What is The Definition of Merger and Acquisition Types?
In a merger, the Boards of Directors (BoD) of two companies approve the merger and seek the shareholders’ approval. In a simple takeover, the acquiring company acquires a majority stake in the acquired company without changing its name or organizational structure. Consolidation creates a new company by merging the main businesses and abandoning the old corporate structures. Shareholders of both companies must approve the consolidation and, after approval, acquire common stock in the new firm.
In a tender offer, a company offers to buy the other company’s outstanding stock at a specified price rather than the market price. The acquiring company forwards the offer directly to the other company’s shareholders, bypassing management and the Board of Directors. In the acquisition of assets, one company directly purchases the assets of another company. The company whose assets are taken over must obtain approval from its shareholders. The takeover of assets is typical during bankruptcy proceedings.
In management takeovers, also known as a management-led buyout, the directors of one company purchase a controlling stake in another company, making it private. These former executives often partner with a financier or former company officials to help fund a transaction. Such mergers and acquisitions are often disproportionately financed by debt and require the approval of a majority of shareholders.
What Are The Reasons For Merger and Acquisition Activities?
Mergers and acquisitions can happen for a variety of reasons, such as:
- Unlocking Synergies
- Higher Growth
- Stronger Market Power
- Tax Advantages
The common logic of mergers and acquisitions is to create a synergy where the combined company is more valuable than the two companies alone. This synergy may result from lower costs or higher revenues.
Cost synergies are created due to economies of scale, while revenue synergies are typically created by cross-selling, increased market share or higher prices. Cost synergies from the two can be easily measured and calculated.
Inorganic growth through mergers and acquisitions is often a faster way for a company to generate higher revenues than organic growth. A company can profit by acquiring or merging with a company with the latest capabilities without taking the risk of developing it internally.
Stronger Market Power
In a horizontal merger, the emerging business will gain a higher market share and gain the power to influence prices. Vertical mergers also lead to higher market power as the company will have more control over the supply chain and thus avoid external shocks in supply.
Companies operating in cyclical industries need to diversify their cash flows to avoid significant losses during the slowdown in their industries. Achieving a target in an acyclical industry enables a company to diversify and/or mitigate market risk.
Tax benefits are examined where one company earns significant taxable income while the other suffers tax losses. The company’s acquisition with tax losses enables the acquirer to use the tax losses to reduce its tax liability. However, mergers aren’t usually done just for tax benefits.
What is The Role of MGC Legal in Mergers and Acquisitions?
MGC Legal’s expert team of mergers and acquisitions, whose goal is to provide effective solutions in legal matters, assists its clients in appropriate financing and advises on the preparation, negotiation and implementation of merger and acquisition agreements for parts of the business. Mergers and acquisitions are among the most complex and important events in an organization’s life, and their consequences reverberate both internally and externally.
The majority of mergers and acquisitions are done in large and medium-sized companies. Large companies often focus on buying and selling publicly traded companies. These are often the largest and most complex deals, often cross-border and may involve cash or stock issues. M&A agreements between private companies can be multifaceted, especially when partnerships are involved.
MGC Legal defines the objectives of its clients primarily in mergers and acquisitions, spin-off, downsizing, joint venture and restructuring. It identifies legal issues that vary depending on factors such as whether the agreement is amicable or not. It creates an end-to-end roadmap for its clients and adds a time frame. By doing due diligence, it gives the best advice on negotiation and negotiation tactics. It works meticulously to minimize risks.
What Are MGC Legal’s Mergers and Acquisitions Services?
MGC Legal provides the following services that both national and international clients need during mergers and acquisitions:
- It concludes mergers and acquisitions agreements and negotiations.
- It makes the necessary permit applications related to mergers and acquisitions.
- It makes necessary notifications to regulatory institutions regarding mergers and acquisitions.
- It provides representation services for each legal entity and/or company.
- It advises on joint ventures and/or limited liability companies.
- It prepares partnership agreements.
- It provides investment and project finance services.
- It negotiates and prepares commercial contracts.
- It provides general legal advice to companies.
- It prepares comprehensive business deals.
- In addition to the most suitable legal entity and structure, it provides consultancy services on other corporate governance issues.
- It provides consultancy services on corporate structuring and company type changes.
- It prepares share transfer agreements and carries out the restructuring process after the share transfer.
- It provides consultancy and planning services for joint ventures, mergers, acquisitions and asset sales.
- It provides consultancy services on structuring agreements, tax applications, and preparation plans.
- It conducts company audits.
Some of the Service Areas of MGC Legal’s Mergers and Acquisitions Team Are
- Mergers, acquisitions and share sales,
- Joint ventures and strategic mergers,
- Corporate consultancy and management,
- Structuring before the transaction, such as divisions, separation of a certain part of the business line or company and taking on another corporate structure,
- Integration after the takeover,
- Reorganization after share transfers.