Mergers & Acquisitions

Mergers For Public Companies

When public securities companies merge together, the process can become complex. The combination and consolidating of companies may help streamline operations in the future, but the selling or transfer of securities should be handled by a legal expert to avoid fraud. WW Partners can navigate mergers and acquisitions of both private and public companies. In the public sector, we can help combine the resources of both businesses to provide better financial strength. 

Types Of M&A’s

When it comes to combining businesses with many investors and securities, the process of meshing them together is crucial. While a business needs to function well after the merger or acquisition, it is also important for the process of moving and combining to be done with grace. 

Horizontal mergers refer to when a company in the same industry comes together to reduce competition. Horizontal merges will help increase its market share by creating better or more products for its customers. This type of merger will create a larger entity that can gain an advantage over its competitors.

Vertical mergers are a strategic combination of businesses in different companies in a similar supply chain. Verticle mergers will increase bargaining power and reduce operational costs. For example, Disney purchased Pixar in order to utilize their additional animation studio and animators. Disney also had a larger distribution network, which helped Pixar expand to a new market of viewers. 

Conglomerate mergers are when two companies in vastly different industries come together to diversify their offerings. Conglomerate options come with the most challenges, but when done successfully these mergers can have unique knowledge and provide advanced technologies and products to the market. Conglomerate mergers risk cultural differences, possible loss of taxation benefits, and reduced innovation as challenges. 

The Merging And Acquiring Process For Public Companies

The process of combining a company and all its assets starts with due diligence. Analyzing financial statements, legal obligations, and operations to assess how a company can proceed. Going over these elements will provide a clear picture of the risks of merging while also seeing the benefits. Due diligence practices show a comparison and lead to assessing the value of a conglomerate business. Valuation should help you determine if the long-term benefits of a merger or acquisition are worthwhile.

Next, both businesses will need to negotiate terms. Each business is often already established and has rituals, stock considerations, and much more. Negotiation will work to establish a purchase price, sell or restructure securities, and navigate business registration and tax eligibility. Each company should feel they are getting something out of the merger and are able to provide security sales to a wider audience. 

The combined business will then need to go through governing bodies like the SEC or other local bodies to approve the M&A transition. These companies will ensure that the merger is done in good standing and doesn’t show signs of monopolization or fraud. 

Finally, the shareholders of both companies need to approve the merger. This process is typically done through voting, especially if the shareholders also hold stock. Those who hold the majority of the shares in a company could approve a merger of a smaller company with fewer shares. This is why public company mergers can often become messy as one party is not voluntary in the combination process. 

Implications For Investors And Stakeholders

There are many challenges that public companies will experience when merging or acquiring another company. One of the biggest challenges is stock prices. Stock prices can fluctuate daily, but can decline even more when acquiring a company that is already on the decline. Due to perceived risks, stockholders could sell which results in shifts in the company’s finances. 

Blending two companies and their employees together is extremely complex. While more employees may be beneficial in some markets, they may be a liability in others. Layoffs, restructuring, and boosting corporate morale may be necessary to improve the future of the new company. Operational shifts could be the thing that breaks the entire merge. 

Additional concerns for public companies include:

• Cybersecurity risks
• Insufficient communications
• Intellectual property risk
• Unforeseen costs
• Financial liability or increase in taxes
• High legal fees
• Miscalculated synergies
• Overvaluing of the target company
• Customer or shareholder loss
• Unpredictable market disruptions

Legal Advice From WW Partners

Our lawyers have worked in the business sector for many years. Public and private businesses can benefit from mergers and acquisitions when done with expertise. Our lawyers will be a friend and someone to lean on during the merging process. Working with out legal team can ensure the longevity of your public offerings.