Mergers and acquisitions play a major role in the efficient functioning of an economy enabling firms to achieve efficiency such as economies of scale and synergies.
We at Owen Hodge Lawyers, do a comparative study of our clients’ business, the industry in which they operate and also analyse the practical skills and experience possessed, which is required to deliver an important transaction or project.
Mergers and Acquisitions
When two separate companies of the same stature decide to operate as one entity forming a new company in the process, they are precisely referred as merged companies. The shareholders of the two companies combine and become the shareholders of the newly merged company. The stocks of the two companies are surrendered and new stocks are issued. Whereas acquisition occurs, when one company offers to purchase another company in lieu of cash payment or share offer or both and thereby acquires a shareholding in or the assets of another company. The target company in that scenario loses its existence.
A successful acquisition is the result of a well-conceived corporate strategy.
Mergers and acquisitions include:
- Mergers between two entities;
- The takeover or acquisition of one entity by another;
- The divestment of major assets or part of a corporate group;
- A demerger that results in separate entities; and
- Internal restructuring that precedes one or more of these activities.
Mergers and acquisitions transactions can happen in a number of ways. The two most common mechanisms are:
- A scheme of arrangement, such as where the shareholders of a company vote to merge with another company; and
- An off-market takeover, such as when one company offers to buy the shares in another company.
Other mechanisms that can be used to effect mergers and acquisitions transactions include:
- On-market takeovers;
- Capital reductions;
- Share buy-backs; and
- Contract for sale.
A broad range of regulators are involved in approving merger and acquisition transactions; or in working out the way in which an approved transaction can be implemented. In case of cross-border transactions, overseas revenue authorities and other regulators may also get involved.
Australian Securities and Investment Commission (ASIC)
ASIC is the main regulator with respect to acquisitions in Australia. It is responsible for the administration of the Corporations Act along with the market supervision. It has powers to modify the provisions of Chapter 6 dealing with ‘Takeovers’ and grant exemptions from strict compliance in certain circumstances which can be important for the success of a bid.
Australian Competition and Consumer Commission (ACCC)
The role of ACCC is to focus on any anti-competitive results with respect to mergers or takeovers. Provisions relating to mergers under the Competition and Consumer Act 2010 (the Competition and Consumer Act) are administered and enforced by ACCC. According to Section 50 of the Competition and Consumer Act, a Corporation must not directly or indirectly acquire shares in the capital of a body corporate or corporation; or acquire any asset of a corporation or of a person, if such acquisition is likely to substantially lessen the competition in a market.
Australian Securities Exchange (ASX)
ASX is responsible for ensuring companies listed on ASX to comply with the ASX Listing Rules. This includes, but is not limited to monitoring compliance of listing rules by listed entities, particularly continuous and periodic disclosure requirements, reviewing proposals of re-organisations and restructuring, monitoring compliance and investigating breach of market rules, clearing and settlement rules by market participants.
Takeovers panel is the main forum, regulating corporate control transactions by providing efficient and speedy resolution to takeover disputes. The panel also decides on appeals relating to ASIC’s decision of modifying and exempting with respect to takeovers.
Foreign Investment Review Board (FIRB)
FIRB examines proposals by foreign interests to undertake direct investment in Australia and recommends the Government, as regards the suitability of the proposals for approval under the government policy. It also monitors and ensures compliance with foreign investment policy.
Contact us as early as possible in regard to mergers or acquisition negotiations so that we can help you with the formation of the contract. We realise the urgency involved in mergers and acquisitions and will work with you to try to resolve issues that may arise and will help you to meet your time frames.