Introduction

Successful companies forming together is common practice in the growing business landscape. Mergers and Acquisitions (M&A) are often coupled together referring to the consolidation of companies. This includes a number of different transactions, important to note that in all cases it involves 2 companies. However, there is a difference between mergers and acquisitions. This article will outline the distinctions. Before starting, here are 5 Questions to Ask When Hiring a Mergers & Acquisitions Lawyer.

Merger

A merger occurs when both sets of Board of Directors approve the proposed combination and seek shareholder approval. After finalisation, they create an entirely new company name.

A recent example that is currently under review by the Australian Competition & Consumer Commission (ACCC) is the proposed merger of TPG with Vodafone. The new company will be called TPG Telecom Limited. This sees the 3rd and 4th largest telcos planning to merge creating a $15 billion competitor to the market leaders of Telstra and Optus.

Acquisition

An acquisition occurs when the acquiring company purchases the majority stake in the acquired firm. However, the acquired company does not change its name or legal structure.

A recent example that was finalised and covered in international media is Disney’s acquisition of 21st Century Fox (founded by Rupert Murdoch) for $71.3 billion. The acquisition includes key assets under the 21st Century Fox group.

So, the ACCC provides an overview and step by step guide for anyone looking towards this area here – ACCC M&A Overview.  

Key Differences

  • Merger occurs when two separate companies (often similar size) combine forces to create a new joint organisation (with a new company name)
  • Acquisition occurs when one entity (bigger company) decides to takeover another entity (smaller company) by purchasing that company
  • Coined together due to the similarities in the process of acquirement and completion

Considerations during M&A

  1. Valuation is negotiable
  2. Can take time to Market, Negotiate & Close
  3. Significant Due Diligence by Buyer
  4. Need a Great M&A Lawyer – Mergers & Acquisitions Lawyer
  5. Consider Hiring an Investment Banker
  6. Intellectual Property Issues will be Important
  7. Acquisition Agreement is Important
  8. Employee Benefits will be Sensitive & Important
  9. Understand the Negotiation Dynamics

Conclusion

With the largest companies in the world continuing to expand their operations into different industries, M&A are occurring more often than before. As a business owner, it is important to understand which option is viable to your company and which path to take going forward. There are many benefits attached to M&A which all relate to the success of your business. As always, we advise that you reach out to a lawyer to discuss these options to ensure that you have covered all the aspects required before deciding on a merger or an acquisition.

Unsure where to start? Contact a LawPath consultant on 1800 529 728 to learn more about customising legal documents and obtaining a fixed-fee quote from Australia’s largest legal marketplace.

Abhinav Parashar

Abhinav is a legal intern at LawPath as part of the content team. Currently in his 3rd year studying a Bachelor of Laws at Macquarie University (Major in Banking, Corporate, Finance & Securities Law). He is keen to learn more about Mergers & Acquisitions in the future.