If you become involved in the transfer of a business, you have to be well prepared. An M&A transaction (merger & acquisition) is, after all, a regulated process in which legal knowledge from different branches of law is required. Of course, it is important to find out which transaction best suits your company’s strategy. If your company wishes to expand its activities, you can, for example, opt for a takeover of or a merger with another company. If, on the other hand, your company wishes to focus on its main activity, you may choose to sell part of your activities.
Share deal and asset deal
In selecting the appropriate transaction, a distinction should be made between a share deal and an asset deal. There is a considerable difference in terms of legal consequences between them.
A share deal is a sale of shares in the company concerned. As a result, the entire company, including all its assets and liabilities, is transferred. Permits, loans and agreements, as well as liabilities, etc. are retained, which immediately demonstrates the importance of a thorough due diligence.
If, on the other hand, you are only interested in specific assets, the business activity or the generality of a company’s assets, then it is best to opt for an asset deal. In this case, it is the company itself that transfers the (group of) assets, instead of the shareholders. In the case of an asset deal, it is important that the assets and any liabilities that are transferred are clearly described in the acquisition agreement. In addition, you may also have to obtain the approval of third-party contractors or creditors.
Wide range of M&A transactions
In addition, a further distinction is made between the following M&A transactions:
Merger by acquisition: one of the companies participating in the merger takes over all assets and liabilities, rights and obligations of the other company in exchange for the issue of shares to the partners of the company being acquired. One of the participating companies continues to exist, the other one is absorbed.
Merger by the formation of a new company: a new company will be created which will take over all the assets and liabilities, rights and obligations of all companies participating in the merger. In return, the partners of the dissolved companies receive shares in the new company. All the companies involved in the merger cease to exist.
Demerger by acquisition: the assets and liabilities, as well as the rights and obligations of the company are transferred to several other existing companies, whereby the demerged company ceases to exist. In return, the partners of the demerged company receive shares in the acquiring companies.