When it comes to business news, many assume that M&A only happens with large share market traded companies. Sure, there are a great deal of companies that work within the boundaries of this method of growing into a large entity, but it’s not always the large corporate business models that lend themselves to this type of growth.
Often times what most people don’t understand is that the private sector, small businesses and more push this type of venture in many ways. Corporate lawyers often times over see the contract negotiations and movements in this framework that happens in the general public all the time, without a great deal of notoriety in business journals that cover corporate dealings.
For those unfamiliar with the acronym of M&A it stands for mergers and acquisitions. It’s in this method that several things can happen with the help of two companies. This is a strategy that deals with buying, splitting, and merging together several different businesses or just two businesses in order to grow.
There are a lot of hurdles that need to be jumped through in order to accomplish this, but it can be done in a small business capacity with special attention to the law.
The law has put out a great deal of framework that needs to be adhered to before two entities can come together for the purpose of merging. That’s why corporate lawyers are called in to help with contracts, paperwork, and different legal issues that will inevitably pose problems for business owners.
This type of practice is not limited to merging; it’s a matter of buying another company’s complete assets and takeover of the ownership. This is different than a consolidation that can also be under the banner of M&A.
In a consolidation businesses of similar types or varying types (depending on the niche) can come together to form a larger enterprise. This type of movement usually happens when several businesses can’t support themselves, and the only way to move forward and stay open is to combine forces with competitors along lateral frameworks.
For instance, if several book stores can’t seem to make enough to cover their costs, they can join together under one mega store and make profits under a name change and structural updates.
Acquisition is something that should be explored as well. This entails larger companies purchasing smaller ones, which is different than consolidation, and merger. This is a flat out purchase that requires similar paperwork as the aforementioned, only the former will cease to exist, as it will get absorbed by the larger entity. This usually means the closure of the smaller business, and all the collateral that comes alongside it.
However you look at both types of business moves, it’s important to understand that there is are legal issues that will require attention in order to move forward.
No companies can simply start operating with each other without written documentation and in many cases corporate legal assistance to ensure that everything is in accordance with the statutes of the local government.