Sometimes, an Indiana business should either merge the business’s operations with another business, or sell the business. That is known as mergers and acquisitions. However, business owners in Fort Wayne, Indiana, should remember that mergers and acquisitions may involve certain risks. As a result, business owners must avoid those risks to ensure brighter future prospects for the business.
With an asset purchase merger, purchasing a company typically means buying all assets, tangible and intangible, of the selling company. Additionally, if the sold business has debts, the new business is not responsible for those.
If the merger is done through a stock purchase, the new business has the option to either buy all shares or buy a majority of the shares, and then push the old business to sell the remaining shares. Nonetheless, in that case, the buying business is required to absorb all of the debts of the selling business, in addition to all of its assets and that business is also responsible for repaying the business’s creditors of the business that is being bought.
With a merger, the new business assumes all assets and debts. Typically, mergers are a combination of both asset and stock purchase, which allows the surviving company to absorb the assets and debts of a business that is being dissolved.
Typically, after the merger and acquisition process is complete, the buying company may retain the old staff for a period of time in order to facilitate a smooth transition. If the situation demands it, the new company can issue agreements that prevent the old company from working with a competitor for a certain period of time after the contract ends with the business that has been acquired.
While those are some of the very basic rules regarding mergers and acquisitions, business owners in Fort Wayne, Indiana, should remember that business laws are often more complex than they seem. Therefore, if a business owner is planning to merge the business with another business or if that business owner is planning to acquire a business, or be acquired, it may be a wise decision to retain an attorney.
Source: AmericanBar.org, “Mergers and Acquisitions: The Basics,” Matt Swartz, 2007