Navigating Mergers and Acquisitions: A Succinct Guide 

If you are looking to expand your business, a merger or acquisition may be a good option to consider. Mergers and Acquisitions (M&As) are two distinct types of transactions, yet the terms are used interchangeably or together to denote various transactions that result in combining companies. 

What are Mergers and Acquisitions? 

A merger involves two similar companies joining to form a single entity, while an acquisition entails one company acquiring another and assuming ownership. The acquisition can take the form of a stock sale, where the entire business entity, including assets and liabilities, is purchased, or an asset sale, where only specific assets are acquired. 

Why consider Mergers and Acquisitions? 

One reason for M&A is the principle that the whole is greater than the sum of its parts. There is greater value in two companies operating as a whole than them operating separately. A buyer will realise more revenue, or cut down costs, by acquiring the target company, resulting in significant growth that would have taken a longer time to achieve by the companies individually. 

M&A also results in geographic expansion and product diversification, where, for instance, a company acquires another which already generates significant revenue from a product that the buyer is seeking to develop. 

Also, M&A may help a company capture more of their market share when they acquire or merge with their competition. 

An M&A may also be for the purpose of purchasing a capability, where a company acquires a talent or technology they neither have nor can build but can leverage better. 

Other types of M&A transactions are partnerships, joint ventures and alliances. 

Steps Involved in an M&A 

A company may choose to do an M&A as part of a strategy for growth or to take advantage of an opportunity that has come their way. Either way, the following steps need to be taken. 

• Strategy development – this involves setting out expectations of what a company hopes to achieve from the deal and the steps to achieve this. Other matters like financing and what entities will be involved must be considered. 
• Target identification – the next step is to search for and evaluate potential target companies. This step is a precursor to conducting due diligence later on. 
• Valuation analysis – here, an analysis based on available data is made of the value of the target company and determine their suitability in relation to the M&A strategy. 
• Negotiations – the company can then make an offer and negotiate terms.
• Due diligence – this entails thorough investigation of the target company to verify their value and  identify liabilities among other things.
• Deal closure – once due diligence is complete, the parties can conclude on final steps and execute the transaction.
• Financing and restructuring – final details of financing come together at this stage.
• Integration and back-office planning – here, both parties work to ensure integration is seamless. This would include tasks like setting up the entity, filing necessary documents and registering agent or address services. 
• Post-merger compliance – this involves ensuring that compliance requirements for both the surviving and non-surviving entities are met, along with a series of other complex tasks.
• Business as Usual – your M&A is finally complete. However, the new entity needs to be continuously monitored to ensure it is in good standing and compliance with relevant laws and regulations. 

For sellers, preparation involves strategic planning, compiling a comprehensive presentation kit, conducting bidding rounds, negotiating with potential buyers, facilitating due diligence, obtaining board approval and finalising agreements. 

Summary

Navigating M&A transactions require expertise and legal guidance. Open Legal offers experienced solicitors who can assist in ensuring a smooth and legally compliant M&A process. Contact us at enquiries@openlegal.com.au or 1300 337 997 for professional support in M&As.