On behalf of Chandler and Brown, Ltd. posted in business planning on Thursday, October 25, 2018.
Business owners in Saint Paul may one day face the prospect of entering into a merger or acquisition. In general, this business planning strategy involves consolidating two businesses into a single entity via a number of types of transactions. In a merger, the acquired business no longer exists; only the acquiring business remains. In an acquisition, which might also be referred to as a takeover, the acquiring business obtains a majority stake in the other business, but neither business alters their names and organizational structures. These days, business restructurings are often simply called a “merger and acquisition” rather than one or the other, because true mergers of equals are not very common, and takeovers are often seen in a negative light.
In either case, the point of undergoing a merger and acquisition is to make each business more valuable than it was prior to the merger and acquisition. Companies can use a merger and acquisition to grow bigger than their competitors. One company may also pursue a merger and acquisition of another company, to secure its value before a competitor does. Mergers and acquisitions can have tax benefits, depending on the circumstances and through consolidation, companies can save money.
However, it is important that a merger and acquisition does not constitute a monopoly. Thus, these transactions are reviewed by regulatory authorities. This is to ensure that the market is still fair for all competitors and consumers. It is important for companies considering a merger and acquisition to understand what laws are applicable to their situation, so they can increase the potential of a successful transition from two companies into one.