Takeovers and mergers, differences and processes
The absorption and merger of companies are complex processes, which usually require the advice of experts in this type of process. At Asesoría Orihuela Costa we are specialists in corporate procedures that include company takeovers and mergers.
Takeovers and mergers, definition and differences
Mergers and takeovers are two business consolidation strategies with different legal and operational characteristics.
In a merger, two or more companies merge to form a new legal entity, the original companies are dissolved and all their assets are transferred to the newly created company. This process is horizontal or vertical in nature and is common between companies of equal size seeking synergies, expanding markets or sharing resources.
Takeover, on the other hand, occurs when one company (the acquiring company) acquires another (the acquired company), but only the acquired company is dissolved and its assets are transferred to the acquiring company. The acquiring company retains its legal identity and is often larger than the acquired company, a process that is common in acquisitions and takeovers.
Both transactions require shareholder approval and are often subject to antitrust regulations, but each has different tax and strategic implications for the companies involved.
Both processes can be complex and require careful strategic planning, as well as following a legal framework that includes shareholder approval and compliance with competition regulations. The choice between merger or takeover will depend on the specific objectives of the companies involved and the long-term strategic advantages.
Legal advice for company takeovers
Legal advice for a company takeover is a complex process, which requires a multidisciplinary team of professionals. Lawyers specialised in commercial and corporate law play a key role throughout the entire operation.
First, a preliminary analysis is carried out to assess the legal and financial feasibility of the takeover. This includes due diligence, which is an exhaustive audit of the company to be absorbed, reviewing legal, economic, labour and tax aspects, in order to identify possible hidden risks or liabilities.
Once the transaction has been assessed, legal advisors prepare the necessary documentation, such as the merger plan, and convene the general shareholders’ meetings of both companies to obtain the required approval. It is also crucial to ensure that the transaction complies with competition law and does not give rise to antitrust restrictions.
Lawyers must negotiate and draft the contracts and agreements that will govern the takeover, ensuring that their clients’ interests are protected. This includes confidentiality agreements, LOIs, and the final sale and purchase or merger agreement.
In addition, legal counsel must manage communication with regulators and obtain the relevant administrative approvals. This may entail procedures with the Commercial Registry, the National Commission for Markets and Competition and other sectoral authorities, depending on the business areas of the companies involved.
Finally, once the takeover is completed, lawyers must assist with post-merger integration, which includes harmonising policies and procedures, managing changes in ownership and control, and corporate restructuring.
This legal advisory process requires strategic insight and a thorough understanding of applicable laws and regulations, as well as the dynamics of the relevant market and industry, to ensure a smooth transition and the achievement of business and financial objectives.
Merger of companies, consultancy
Legal advice in merger processes is crucial to ensure compliance with applicable law and the protection of the interests of all parties involved. Corporate lawyers are involved in the following stages:
- Strategic planning: An analysis of the legal implications is carried out and a roadmap of the process is established. Business objectives are identified and the structure of the transaction is assessed.
- Due diligence: This is a meticulous legal review to identify risks, outstanding obligations and assess the legal status of the companies. Contracts, active litigation, regulatory compliance, intellectual property and employment status are examined.
- Legal documentation: All necessary documents are prepared, such as the merger plan, preliminary agreements, shareholders’ agreements and the final merger contract. Minutes of the shareholders’ meetings are drafted for the approval of the merger.
- Negotiations: Lawyers assist in negotiating the terms of the merger, addressing issues such as valuation of companies, exchange of shares and warranties.
- Clearances and notifications: Regulatory approvals are obtained and required notifications are made, including competition and financial market notifications, if applicable.
- Closing of the transaction: Signing of the final documentation and registration with the Commercial Registry.
- Post-Merger: Advice on the integration of the companies, ensuring operational continuity and unification of corporate policies.
The lawyer must handle tax, labour, competition and commercial aspects, and be prepared to resolve any complications that arise during the process. Legal advice is, therefore, an indispensable component for the success of a business merger.
At Asesoría Orihuela Costa we offer you the best team for processes that include mergers and acquisitions of companies.
