Merger and Acquisition Attorneys
Whether you are a firm that is interested in a merger or a business facing an acquisition, the Bassett Law Firm can advise you on the complicated state and federal laws that govern the consolidation process to help ensure ethical practices are observed throughout the proceedings. Call 479.521.9996 to schedule a free initial consultation to discuss your merger and acquisition needs.
What is a Merger?
A merger occurs when two or more firms join together to form one organization. This new company usually takes on a new name. Organizations involved are usually of similar status and size and are sometimes referred to as “mergers of equals”. The type of merger that occurs between organizations depends on the relationship between the consolidated companies, the nature of the transaction, and the economic task of the merger. There are five categories of business mergers: conglomerate, horizontal, vertical, market extension, and product extension.
A pure conglomerate occurs between firms of a different nature, while a mixed conglomerate involves companies merging for market or product extensions. A vertical transaction involves two or more companies that operate under different levels within the production supply chain. Organizations merge with the notion that companies would be more efficient as one. A horizontal merger involves two or more firms that operate in the same market as competitors providing similar goods and services. This type of transaction usually occurs when there are few companies in the industry and a consolidation would lead to potential gains in market share. A Market Extension merger occurs between organizations that provide the same service or product but in different markets. This transaction gives consolidated companies access to larger markets and a greater customer base. A Product Extension merger involves companies who offer related products in the same market-place. This type of consolidation allows organizations to combine their products for access to a greater consumer base and increased profits.
What is an Acquisition?
During an acquisition, a larger organization usually purchases a smaller company and then incorporates it under its patent or as a subsidiary of its organization. The company of interest by the other company is often referred to as the target and can be acquired either voluntarily or involuntarily.
With a friendly acquisition, a firm voluntarily invites other companies to purchase its business. A hostile acquisition occurs when the target company does not wish to sell its business. The other organization determined to purchase the company, takes the initiative of purchasing the equity shares of the target business from its existing shareholders.
Regulations and Laws Governing Mergers and Acquisitions
Each country has its own rules and regulations regarding acquisitions and mergers. In the United States, laws are designed to protect the interest of the shareholders, under both state and federal law.
State Laws Regarding Mergers and Acquisitions
State laws determine the process by which an acquisition or merger can be approved in any country. These laws help ensure that shareholders of the target company receive fair value for their equity. In the U.S., to protect shareholders, the United States government passed the law that the voting process of the Board of Directors and the shareholders of the two separate companies can only finalize a merger deal. U.S. state laws also protect target firms from hostile takeover by providing both legal and financial support.
Federal Laws Regarding Mergers and Acquisitions
Some mergers can change the market dynamics in ways that can lead to negative effects on consumers, such as monopolistic behavior, lower quality or fewer products, less innovation, and higher prices. Simultaneously, antitrust laws, the Clayton Act, the FTC Act and the Sherman Act prohibit mergers and acquisitions that may lead to a monopoly or substantially lessen the competition.
Contact Merger and Acquisition Attorney
To discuss your Merger and Acquisition questions call the Bassett Law Firm LLP at 479.521.9996 or fill out the brief contact form to schedule a free initial consultation. The firm is located in Fayetteville, Arkansas and has experienced attorneys with the knowledge to meet your needs in Oklahoma, Missouri, and Arkansas.