Coates & Davenport, P.C.

Mergers and acquisitions are complex business law undertakings

The business world in Virginia is ever-evolving. It is not unusual to hear of companies merging, especially large companies. These can be multi-million-dollar deals, so it can help to have a basic understanding of the variety of activities that fall under the umbrella of mergers and acquisitions.

Mergers take place when one business acquires another business. The acquired business is incorporated into the acquiring business, so that once the merger is complete, the acquired business no longer exists. Mergers must be approved by both businesses' board of directors and shareholders.

Acquisitions take place when one business obtains a majority stake in another business. The acquired business keeps its original name and legal structure.

Through a consolidation an entirely new business is established between two companies. Consolidations require the approval of each party's shareholders who will be granted common equity shares in the newly formed business.

A tender offer takes place when one business buys the outstanding stock of another business for an agreed-upon amount. The acquiring business will make the offer directly to the shareholders of the other business, rather than to that business's managers or board of directors. Some tender offers result in acquisitions, but most of them result in a merger of the two businesses.

In the end, any merger or acquisition is a complex business transaction. Not only may both companies undergo many negotiations before a final deal is reached, but there are often laws and regulations to follow for transaction to be legal. Because both parties to a merger or acquisition want to ensure they are making a good deal, they each may want to seek the guidance of a business law attorney who can represent their best interests and ensure all applicable laws and regulations are followed.

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