Merger or acquisition? These terms are interchangeable in everyday discourse. However, they have distinct, different legal meanings. If you are involved in such a transaction-in West Virginia (WV) or elsewhere-it is crucial to know the difference. Your WV mergers and acquisitions lawyer should command a thorough knowledge of these legal distinctions and the nuances of each. The attorneys of Jenkins Fenstermaker, PLLC are experienced and trusted advisors who guide companies through the mergers and acquisitions (M&A) process.
Corporate restructuring involves a multitude of moving pieces at every stage of the process, from formulating merger and acquisition strategies to due diligence analyses and through integration planning and implementation. The professionals on your team can make the difference between a smooth transaction with positive results and a problematic deal with ineffective integration. An astute business client hires a seasoned WV mergers and acquisitions lawyer with the business acumen to navigate opportunities and litigate divisive issues.
Coming Together-the Difference between Merger and Acquisition
Acquisitions sometimes carry a stigma, and true mergers seldom occur. As a result, business restructuring is increasingly referred to collectively as M&A. Both terms refer to the combining of two business entities; however, the legal difference between merger and acquisition is meaningful.
In a merger, two companies combine to create a new legal organization. Company stock is exchanged to consummate the deal; no cash is exchanged. The absence of cash can facilitate a smoother transaction, but the ownership of each company's shareholders is diluted.
In an acquisition, or takeover, one company purchases a controlling interest in another and integrates that target into its corporate structure. A new organization is not created, and the purchasing company assumes full control.
In some cases, the target company is absorbed into the purchasing entity and no longer exists. When the target does not welcome these overtures, the situation is referred to as a hostile takeover.
Merger and Acquisition Strategies: Weighing the Benefits, Risks, and Liabilities
The difference between merger and acquisition also dictates various risks and liabilities, including the obligations adopted by the purchaser. A deal to acquire a company is typically designed as either an asset purchase or a stock purchase.
In an asset deal, the buyer identifies the exact assets that will be included in the transaction, effectively avoiding certain liabilities. The buyer may also realize preferential tax treatment. However, the time spent working through the details of an asset deal can increase transaction costs.
In a stock deal, the buyer purchases all or a controlling portion of the target company's stock. Transaction costs are often lower in this scenario because the purchasing company acquires the target organization as a whole-its book of business, assets, and liabilities (known and unknown).
In a merger, the ongoing concerns of each business, including any liabilities, are blended into a new legal entity.
How Will State and Federal Laws Affect Your Deal?
Federal and state code and regulations also influence how an M&A deal will be structured, and, in some cases, whether a transaction will be allowed to proceed.
An experienced WV mergers and acquisitions lawyer is prepared to address all legal questions that arise and to meet legal requirements under both federal and state laws. The following statutes are relevant in mergers and acquisitions:
- Federal securities laws (for example, the Securities Act of 1933 and the Securities Exchange Act of 1934);
- Federal tax code provisions such as those relating to reorganization; and
- The West Virginia Business Corporation Act.
The uniting of two businesses can raise concerns of creating a monopoly or the use of unfair trade practices. Federal antitrust laws-such as the Hart-Scott-Rodino Antitrust Improvements Act-impose various requirements on the parties. One requirement is the filing of premerger notification with governmental entities, including the Federal Trade Commission and the Department of Justice Antitrust Division. The U.S. Securities and Exchange Commission also plays a role in overseeing such transactions.
An experienced WV mergers and acquisition lawyer knows how to balance these business and legal interests and advise and assist clients accordingly throughout the process.
Partner with an Experienced WV Mergers and Acquisitions Attorney
The attorney you hire to manage your business transactions can have a significant impact on the end result. Jenkins Fenstermaker's WV mergers and acquisitions attorneys have decades of experience advising clients on all aspects of corporate restructuring-from merger and acquisition strategies to avoiding hostile takeovers.
When lawsuits arise from these transactions, the attorneys of Jenkins Fenstermaker have the litigation prowess to successfully represent your interests. Contact WV mergers and acquisitions lawyer Stephen J. Golder for assistance with your restructuring needs by completing this convenient online form or calling (304) 523-2100 or (866) 617-4736 toll-free.