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What should a business know before a merger?

On Behalf of | Sep 12, 2019 | Business Law

The merger of two Virginia businesses occurs when one entity buys the other or they otherwise choose to combine their operations into one individual structure. Business mergers can make good business sense when merging financially benefits the parties. Unfortunately, not all business mergers involve adequate research and planning to avoid costly and sometimes devastating outcomes.

For example, before a business agrees to acquire another through a merger, the acquiring business should fully understand what debts and liabilities the other has taken on. The acquiring entity may assume those responsibilities when it folds the other into its operations, and it may not have the financial power to cover such responsibilities if they are too high.

Additionally, an acquiring business should review the operating documents of any entity that it plans to merge with. A business’s operating documents may include, but are not limited to, their bylaws, their articles of incorporation, and their meeting minutes. By reviewing these and other essential business documents, an acquiring entity can ensure that the business it will take on is properly managed and legally administered.

It may not be possible for a business to know everything about a prospective merger before it happens, but when businesses do their due diligence, they can avoid costly headaches. Some entities will work with intermediaries to help facilitate their business mergers, but the use of intermediaries may have its own challenges. Trusted legal support from business law attorneys can make a big difference in the lives of business owners who wish to combine and merge their organizations with others.