How to Merge Two Companies
Owning your own company is an impressive accomplishment with its own set of challenges. And if you decide to merge your business with another company, you’ll encounter a whole new array of hurdles, even though the end result can be very beneficial to both sides of the merger. Read on to learn some of the key points to consider before a merger, and to better understand how to merge two companies.
What Is a Merger?
A merger occurs when two or more companies join together to form a single business entity. This often helps them achieve greater success by taking advantage of their respective strengths and resources. The final structure and details vary from agreement to agreement, but from a financial standpoint, the companies generally combine their assets and liabilities to improve their overall financial picture.
A merger is technically distinguished from an acquisition where one company is taken over by another company. However, the two terms are increasingly used together, with these corporate restructurings generally referred to as “mergers and acquisitions.”
What to Look for in a Company
Before agreeing to a merger, it’s important to look into the financial, legal, and operational health of the other company. Some important factors to consider – and information you’ll probably have to provide to the other company – include:
- Copies of balance sheets, tax returns, and accounting records
- A list of assets such as real property
- A list of existing and potential customers
- A list of employees and employee benefits
- Information about any pending lawsuits against the company
- Locations where the company is authorized to do business
- Copies of the company’s articles of incorporation and bylaws, if applicable
While this is not a complete list, it will help you get a good start on evaluating whether or not to merge your two companies.
How to Merge Two Companies: Issues to Negotiate
If you do decide to pursue a merger with the other company, there will be many issues to consider and negotiate during the process. For example, once you join forces, what will your legal structure look like? How will you combine your boards of directors, executive officers, and others in management? Will the merger create any redundancies such that certain employees or departments will need to be let go?
You may also need to consider how you’ll combine stock options, since one company’s stock is probably worth more than the other’s. And of course, you’ll have to decide on the new company’s name. You may choose a new name altogether, keep the name of only one of the companies, or combine the two names into one (for example, when the Thomson Corporation and the Reuters Group became Thomson Reuters).
Merger Professionals Who Know How to Merge Two Companies
A merger is a demanding operation with a lot of moving parts. Thankfully, there are many merger professionals who handle these types of transactions for a living. One such professional is the intermediary, who can represent you during the process, helping to structure and negotiate the final merger agreement.
Mergers also have many legal ramifications. You often have to consider securities, antitrust, and tax laws, in addition to other applicable state and federal laws when completing a merger. An experienced attorney can help to ensure you comply with the laws pertinent to your situation, and some even focus solely on mergers and acquisitions.
Start the Merger Process by Contacting an Experienced Attorney
Even though companies merge every day, the process itself can be laborious and complicated. While the final merger can produce a stronger, more efficient, and productive company, there are many financial, legal, and structural aspects to evaluate and negotiate in order for the process to go as smoothly as possible. Get experienced advice by contacting a local mergers and acquisitions attorney who knows how to merge two companies like yours.