People use the terms mergers and acquisitions interchangeably, but they have different meanings. In an acquisition, a company takes over another one and becomes the new owner. A merger refers to two firms, roughly the same size, that come together to do business as one company or a merger of equals.
For example, Daimler-Benz and Chrysler merged to become Daimler Chrysler. They surrendered their stocks and issued new company stock for the new company. Asset acquisition refers to the purchase of a company’s assets instead of its stock
A business acquisition describes when your company buys most or all shares in another company to get control of the company. When you purchase over 50% of a firm’s stock and assets, you can decide what to do with the assets without waiting for approval from the other shareholders.
Benefits of Mergers and Acquisitions (M&A)
A merger or acquisition can have several benefits for your company:
Better Economies of Scale
If you join forces with another company, the new and larger company has higher material and supply needs. When you purchase the necessary materials or supplies in larger volumes, your business improves scales with lower costs, and you can pass the lower costs to your customers.
Lower Costs of Labor
Mergers or acquisitions mean eliminating extra staff that might be doing the same job. It means lower wage costs and the maintenance of a more dynamic workforce. You can review the worker’s performance doing similar roles and choose the best one for each position.
Enhanced Market Share
When you merge your company with another in the same industry, the new company enjoys a better market share. The company taps into the resources both companies bring to the table.
Improved Financial Resources
When you get into an M&A deal, you pool your finances, increasing your new company’s financial capacity. You may encounter new investment opportunities, and you can now reach a bigger audience because you have a more significant budget for marketing and more inventory.
Potential Pitfalls of Mergers and Acquisitions
Mergers and acquisitions also can have their pitfalls despite their many benefits. Carefully consider the pros and cons of M&A. Some of the pitfalls include:
You have to pay all the professionals involved in the M&A logistics. If you acquire another company, you have to pay a lump sum for its assets. This cost may be a disadvantage to your business.
Loss of Potential Opportunities
The energy, financial resources, and time that go into a merger or acquisition might mean your company and the other company have to forego opportunities that may arise during the process.
The M&A Process
Mergers and acquisitions are complex processes that require the help of professionals like lawyers, accountants, and risk management professionals to guide you towards a successful deal conclusion.
In North Carolina, mergers and consolidations need:
- Agreement Notice
- Written Agreements
- Approval from the Commissioner of Insurance
- Agreement adoption
- You have to file the Certified Agreement with the Secretary of State
- You have to file the already filed Certified Agreement copy with the Register of Deed
- You must pay a filing fee of $125 paid to the NC Secretary of State. All fees needed by the Insurance Commissioner are on the fee schedule of the Department of insurance.
Contact An Experienced North Carolina M&A Attorney
This process is time-consuming and complex. You need experienced professionals who know how to navigate the process – Wilson Ratledge has the experience and expertise to guide you and your company through the challenging process of a merger or acquisition. Contact us today to schedule a consultation to talk more about your situation and how we may be able to help!