According to a recent Wall Street Journal survey mergers and acquisitions (M&A) are poised to increase in 2013. See the WSJ press release. The Journal’s survey, which tilts towards Silicon Valley and Northern California, indicates that deal makers attribute the potential for increased M&A activity throughout the remainder of 2013 and into 2014 to the recent rise of the public equity markets, stronger U.S. corporate growth rates, and competition for companies with substantial market share and strong balance sheets among strategic buyers and financial acquirers. In the last 12 months, Finkel Law Group has counseled companies contemplating a merger, acquisition or related transaction in the areas of online commerce, social networking, restaurant and catering, and early childhood education.
In general, an M&A deal refers to one of three types of transactions: asset acquisition, stock purchase or merger. In M&A deals, one of the first and most important decisions facing the buyer and its counsel is to identify and select the most appropriate form of the transaction. The buyer often has a choice of effecting the acquisition by either (1) purchasing all or a portion of the assets of the selling corporation, and usually assuming all or some portion of the liabilities associated with those assets; (2) purchasing all or a portion of the seller’s stock; or (3) merging the buyer and seller, after which only one company survives.
From a legal perspective, some of the most important issues to consider when contemplating an M&A transaction are (1) the required corporate approvals, including dissenters’ rights, to complete the transaction, (2) tax free reorganizations versus taxable transactions, (3) the seller’s liabilities and obligations assumed by the buyer, (4) the assignability of contracts, leases, and other legal rights, (5) the resulting minority interests that flow from the deal, (6) California sales tax, (7) the possibility of unwanted assets in a tax-free reorganization, and (8) how federal and California corporate and securities laws apply to the deal.
From a business perspective, some of the most important issues to consider include (1) confirming ownership of the seller’s assets, (2) reviewing the financial statements for accuracy and confirming sales figures, (3) determining leadership roles in the new organization and eliminating duplication sooner rather than later, and (4) confirming a cultural match and deciding how to reduce and hopefully eliminate cultural conflicts that almost always arise.
Finkel Law Group, with offices in San Francisco and Walnut Creek, has a thriving M&A practice that continues to grow as both buyers and sellers gain confidence in the direction the economy is heading, the impact of this growth on their particular market segments, and the increasing availability of capital to finance transactions of all sizes.
In coming weeks, we will be discussing a range of M&A issues as part of our “insights” series to help you better understand the key issues and potential pitfalls that arise in many M&A transactions. If you need intelligent, insightful, conscientious and cost-effective legal counsel to assist you with an M&A transaction, contact us at (415) 252-9600, or info@finkellawgroup.com to speak with one of our attorneys about your deal.