The idea of a business merger or acquisition can create excitement and trepidation. Both processes can enhance business growth and development, as well as create new opportunities for all involved. However, it is important to understand the difference between the two business ventures, and the unique steps involved in making these transitions happen smoothly.
When embarking on a merger or an acquisition, the controlling law is the Corporations Act 2001. Regardless of the type of business venture you are pursuing, it is imperative that you and your team are aware and in compliance with the laws of the Corporations Act.
In addition to the Corporations Act 2001, you must comply with all of the rules and regulations of the Australian Securities and Investments Commission Act (ASIC) and the Australian Securities Exchange (ASX). Hence, it is imperative that all three of these bodies of regulation are reviewed and properly followed for any merger or acquisition:
- Corporations Act 2001
- Australian Securities and Investments Commission Act
- Australian Securities Exchange
Initially, your business must determine if it is interested in merging with another business, or acquiring a new business. Therefore, it is important to understand the difference between a merger or an acquisition. The two business ventures are different, and you will need to define which venture best suits your needs. It is also necessary to understand the needs of the other company involved.
Merger: A merger involves taking two companies of like stature and similar business interests, and combining them for the purpose of expanding their services and/or products. The uniting of two such businesses can increase customer base and profitability, as well as enhance creativity and promote internal growth and opportunities.
Acquisition: An acquisition is the taking over of one company by another, in which the company that is purchased then ceases to exist as a separate entity. This form of a business transaction can be used to protect the assets of the purchased company, increase the financial growth of the purchasing company and, often times, save the jobs of those who are working for the less solvent business.
If you are considering either of these options, there are several preliminary steps that it would be prudent to review and consider. These include;
- The financial health and solvency of your business. You must determine if you have the funds necessary to complete the expensive and lengthy processes.
- The risk of merging or acquiring the financial debts and assets of the business you are considering partnering with or purchasing.
- The type of team you will need, and their varying areas of expertise, to assist you in successfully understanding and complying with all of the necessary legal and financial requirements for the transaction.
- A clear definition of your objectives for the new business being created
- Investing the proper amount of time to carefully search out the right business candidates for your merger or acquisition.
For either of these business transactions to be done efficiently, it is important to consider using various professional advisors. The expertise of the following professionals can be used to develop a plan for a smooth transaction, and the eventual implementation of the changes.
- Financial Advisors
- Business Management Consultants
- Legal Advisors
- Public Relations Professionals
- Advertising Agencies
- Accountant and Tax Experts
- Corporate Psychologists
Once you are ready to begin the process there are three major steps that need to be put into place:
The planning stage includes all of the necessary financial analysis, research, negotiations, and drafting of the merger or purchase agreement. Other areas in need of definition will include the possible configuring a new Board of Directors, obtaining expert reports on the issues of job efficiency, addressing the area human resources, improvements and additions to the professional staff, and the transitional steps that will need to be taken to allow the business to continue to run smoothly during the changes.
The resolution stage requires that all significant parties come together in review of the plan. The Board of Directors, the shareholders and the owners must all weigh in on the proposed agreement for the merger or acquisition. Any opposition to the deal must also be addressed during this time frame. Additionally, a review of the legal implications and compliance with all regulations must also be successfully completed.
Finally, when all is agreed to, the changes must be implemented. The magnitude of the changes will determine how long it will take for the two entities to combine, or for one entity to dissolve into the other. This period can be as short as a few months, or as long as a year or more. During the period of implementation there may be fluctuations in the value of the stock, changes in management and new human resource policies put into play. It is imperative that all parties work together with patience and diligence so as to effect a smooth transition for everyone involved.
In the event that you find yourself in need of assistance with a business merger or acquisition, please contact the law offices of Owen Hodge Lawyers. At Owen Hodge, we are always happy to assist clients in understanding the full ramifications of any and all of your legal needs. Please feel free to call us at your earliest convenience to schedule a consultation at 1800 770 780.