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What is a Merger?
The word Merger has a strictly legal meaning and has nothing to do with how
the combined companies operate in the future. A merger occurs when one corporation
is combined with and disappears into another corporation. All mergers are
statutory mergers, since all mergers occur as specific formal transactions
in accordance with the laws, or statutes, of the states where the company's
are incorporated. The post-transaction operations or control of a company
has no relevance on whether a merger has occurred or not.
What is an Acquisition?
An Acquisition is the process by which the stock or assets of a corporation
become owned by a purchaser. The transaction may take the form of a purchase
of stock or a purchase of assets.
What's the difference between a Merger and
an Acquisition?
An Acquisition is the generic term used to describe a transfer of ownership,
and Merger is a distinctive, technical term of a particular legal procedure
that could or could not happen following an acquisition. It is far more common
for an acquisition to occur without a following merger in today's marketplace.
What is a Leveraged Buyout?
A Leveraged Buyout (LBO) is a transaction whereby a company's stock or assets
are purchased with borrowed money, making the company's new capital structure
to be a high percentage of debt. An acquisition of all the selling company's
stock, usually by a newly formed corporation created for the sole purpose
of the acquisition, followed immediately by a merger of the buyer's new company
with the acquired company, so that the assets of the acquired company become
available to the buyer to secure debt.
What is an Earnout?
An Earnout is a method of compensating a seller based on the future earnings
of a company. It is the contingent portion of the purchase price. A common
type of earnout provides for additional payments to a seller if the earnings
exceed agreed-upon levels. Another type of earnout may provide that certain
debt given to the seller as part of the acquisition price be paid out early
if earnings exceed agreed-upon levels.
What are the different forms of transactions?
There a three general types of transactions in the acquisition of a business.
The purchase of the assets of the business, the purchase of the stock of
the business owning the assets, and a merger of the buyer with the business.
What is an Asset Transaction?
The acquired company transfers the assets of the business to the purchaser.
These could include equipment, inventory, and real estate, as well as intangible
assets such as contract rights, leases, patents, trademarks, etc. These could
be all or a portion of the assets owned by the selling company. The acquired
company executes the specific types of documents necessary to transfer the
assets, such as deeds, bills of sale, and assignments.
What is a Stock Transaction?
The seller transfers the shares in the acquired corporation to the purchaser
in exchange for an agreed-upon payment. A Stock Transaction is appropriate
when tax costs or other problems of doing an asset transaction make an Asset
Transaction less appealing.
Why
VR M&A?
VR M&A fills the void between general business brokerage and the investment
banks. Specializing in transactions valued between 2 and 15 million dollars,
VR M&A supplies it clients access to a network of highly trained professionals,
that by virtue of being part of the VR network have the resources required
in this specialized market. VR Mergers & Acquisitions has forged strategic
alliances with the world's top three investment banking firms, enabling us
to provide our clients access to a lucrative network of qualified, professional
buyers worldwide. Contact your local VR office and speak to one of their Merger & Acquisition
specialists.
Contact
us for more information.
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