Many business law transactions fall under the umbrella of merger

On Behalf of Dunlap Fiore, LLC |

Sometimes two businesses in Louisiana will decide that it would benefit them both financially to join forces and consolidate, in what is generally called a merger. While mergers often involve large companies, it is important to note that even small businesses can be parties to a merger. Moreover, there are numerous transactions that fall under the umbrella of a merger.

Mergers take place when, with the approval of each company’s board of directors and shareholders, one company acquires another company, and the acquired company ceases to exist once the transaction is complete. In contrast, in an acquisition one business will obtain the majority stake in another business, but the acquired business will retain its name and legal structure.

A consolidation results in an entirely new company altogether. Each company’s shareholders must approve the transaction and once it is complete all shareholders will be granted common equity shares in the newly-formed business.

A tender offer takes place when one business makes an offer to buy the outstanding shares of another business for a specific price. The acquiring business will make the offer directly to the other business’s shareholders, rather than the board of directors. If a tender offer is approved, the general outcome is usually a merger rather than an acquisition.

In an acquisition of assets, one business will purchase the assets of another business, with the approval of that business’s shareholders. This type of transaction often takes place within the context of bankruptcy, where a business is liquidating its assets.

Finally, there are management acquisitions. In this transaction, the executives of one business will buy out a controlling stake in another business, making that business private. A management acquisition generally must be approved by shareholders.

As this shows, there are many types of transactions that are referred to using the general term of “merger.” However, not all mergers look the same. Business law attorneys can be consulted by companies interested in a merger, so they can choose the type of business transaction that best meets their needs.