Mergers and acquisitions are the two major ways in which two companies merge with one another. You may have already heard about several mergers and acquisitions in India.
Have you ever wondered what a merger or an acquisition of two companies is all about? Every merger or acquisition is a sum total of various factors. All these points are important in their own way and play an important part in the merger of two or more companies.
This post will cover some of the salient points linked to a merger as well as the acquisition of companies in India.
Highlights of mergers and acquisitions
Mergers and acquisitions – these are two key terms that encompass a number of aspects between two business organizations. These include intellectual property, human resources, and other legal aspects.
While such business activities present business organizations with exciting future prospects, they also present several financial challenges. As such companies take all the necessary measures to keep concerns and apprehensions at bay.
In general, companies that acquire other companies take the following key points into consideration:
1. Mergers & acquisitions happen over a longer timeframe
Generally, negotiations concerning acquisitions and mergers happen over a period of at least four to six months. Things can conclude early on if the CEOs of two companies prepare themselves early on with the answers to several important questions.
In other words, for a merger or acquisition to come to a conclusion early on, they need to be fully prepared with proper presentation and materials in a time-bound manner.
Such a presentation proves to be helpful in taking care of grey areas by shedding light on various issues, ranging from job security to remuneration and revised employment terms and conditions.
2. A buying company emphasizes more on the due diligence process
When a bigger company acquires a smaller company, the former not only acquires a company but also the workforce and liabilities. In some cases, it may also end up being the acquisition of potential and existing risks of a parent company.
Due to this reason, a company leaves no stone unturned in studying the risks and liabilities involved in contracts and other aspects while acquiring a company. If required, they also do not hesitate from setting up a virtual data room. This helps exchange key information among the important officials of a company in a confidential manner.
3. The involvement of an experienced attorney is essential for the proper conclusion of a merger or acquisition
The M&A process involves various legal aspects that a common person may not even think of. It takes an in-depth understanding of all kinds of legal intricacies. Generally, an expert professional can understand the delicacies of certain details.
In comparison to legal enthusiasts, professionals are in a better position to identify the technicalities and various requirements and address them in a time-bound manner.
Certain aspects such as critical transactions linked to a merger or an acquisition necessitate a careful deliberation. Due to their good understanding and experience, an experienced M&A lawyer will be in a better position to handle the challenges with their skills.
4. A definitive & strong legal agreement is of paramount importance
For a merger or acquisition deal to go through successfully, it is essential to have a legal agreement. In fact, a legal agreement is of paramount importance for any kind of successful deal or merger.
More than the compliance of the law, a legal agreement is a document which states all the necessary terms and conditions. When the CEOs of both companies sign it, they confirm that they have understood the terms and conditions and are in agreement to it.
This kind of legal understanding plays a major role in avoiding legal complications. It can be attributed to the fact that an elaborate written agreement takes care of the concerns and apprehensions of both parties. It addresses them legally.
There is no denying that any merger or acquisition creates numerous uncertainties. A wave of uncertainty looms follows when a major company acquires or merges with a minor one. Sometimes it can even take place between two evenly-matched companies.
It benefits both companies alike. It addresses the expectations of employees in terms of job retention, remuneration and other factors. In addition, it also addresses various redundancies that one can associate with a merger deal.
Going by the long list of essentials, you can safely conclude that it takes a long time and patience to fully know about merger and acquisition companies in India. That said, you may want to know about the important aspects to it if it concerns you in any way. On the other hand, you need to bear the aforementioned salient points if you either happen to be a buyer or seller in a merger or acquisition deal.