An acquisition can create shareholder value over and above the sum of the two companies involved and this can often create a more competitive, cost-efficient company as well as creating economies of sale, enhancing sector visibility and seizing a greater market share.

Pure mergers are more unusual than acquisitions simply because there is rarely a merger of equals. The usual scenario is for one company to take over another and establish itself as the new owner. The target company then becomes the subsidiary of the acquirer or its assets are hived into the acquirer.

The steps relating to a typical Merger or Acquisition will include the following:

• Financial Due Diligence/Valuation of the target and a review of the structure of the transaction including taking tax advice. This will involve your legal advisors working closely with your Corporate Financier/Accountant.
• Agreeing an offer and putting a Non-Disclosure Agreement and Heads of Terms in place. The Heads often establish the key principles of the deal and pre-empt detailed negotiation of any commercial matters later in the transaction. An additional Lock-Out Agreement can be a good way to ward off other buyers at this stage
• Conducting the Legal Due Diligence process.
• Negotiating the transactional documents including the Share Purchase Agreement/ Asset Purchase Agreement as well as the ancillary documents.
• Completion of the acquisition.

The acquisition process can often be easier than actually making the merger/acquisition work and this will be a key challenge for the management team who will be dealing with a range of logistical, financial and cultural issues. An M & A transaction is often said to be only as worthwhile as the management of the people affected.

The Business Growth Hub can help you to access specialist services and assistance designed to help you consider, plan for and undertake acquisitions and mergers