From a legal standpoint, an acquisition occurs when one company acquires all or substantially all of another company’s stock to gain control of that company. Acquisitions of both private and public companies are common in business and arise with or without the seller’s (target company) approval. Once an acquirer identifies a target or vice versa, both companies employ legal and financial advisers to ensure a successful acquisition.
Business acquisition negotiations often center around the price and financial advisers are instrumental to successfully close a transaction. We work with finance advisers in the area of business valuation, financial due diligence and compliance with U.S. Securities and Exchange Commission in order to set the acquisition up for success.
In the negotiated acquisition setting, when the parties reach a preliminary agreement on the price and structure of an M&A transaction, the agreement is memorialized in a term sheet or a letter of intent. The provisions in the term sheet or the letter of intent are usually non-binding, and they are typically regarded as an indication of good faith to proceed to the next stage.
At this point the due diligence stage of a company M&A begins. Typically, the due diligence proceeds in tandem with negotiation of a definitive agreement – Stock Purchase Agreement, Asset Purchase Agreement or Merger Agreement.
Asset purchases are another form of acquisition and involves the purchase of all of the assets of the target company. The asset purchase transaction is negotiated between the buyer and the seller, and the procedures are similar to those for a merger.
Mergers involve corporate actions – mergers must be approved by management or the board of directors, and then submitted to the members or shareholders for approval. In the typical merger transaction, one company by virtue of corporate action becomes part of another company which survives the merger. The surviving company must undertake similar corporate action.
The members or shareholders of the first company, by operation of law, become members or shareholders of the surviving company. The first company disappears by operation of the state merger laws, and the surviving company succeeds to the legal title of all assets of the initial company and inherits all of its obligations as well.
In Florida, the Florida Business Organizations Title spells out the procedures for mergers and acquisitions in detail. However, in the area of mergers and acquisitions, the Florida Statutes are supplemented by Florida common law, the company’s organizational documents and federal law. In specific M&A transactions, the U.S. Securities and exchange Commission requires both the acquirer and the acquire to file reports.
We successfully advise private companies, business owners and investors related to the purchase or sale of a company, company merger, and cross-border sales and merger transactions. Contact us, your business attorney in Florida, to help you with legal due diligence, negotiate transaction terms, execute share purchase agreements, asset purchase agreements or merger agreements, and see the deal through to final closing.
