MERGERS & ACQUISITIONS (M&A)

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.

­ Demerger by formation of new companies: the assets and liabilities, as well as the rights and obligations of the company are transferred to several companies that will be set up, whereby the demerged company ceases to exist. In return, the partners of the demerged company receive shares in the new companies.

­ Mixed demerger: the assets and liabilities, as well as the rights and obligations of the company are transferred to one or more existing companies and one or more new companies, whereby the demerged company ceases to exist. In return, the partners of the demerged company receive shares in the acquiring and new company(ies).

­ Partial demerger: demerger whereby the transferring company continues to exist. The partners of the demerged company receive shares in the new and/or acquiring company(ies).

­ Transfer of a going concern/a universality of goods: the company transfers its entire assets and liabilities to one or more existing and/or newly established company(ies), whereby the transferring company receives shares in the new and/or acquiring company(ies).

­ Transfer of a branch of activity: the company transfers an entire business activity, as well as the associated assets and liabilities, to another company for a remuneration in shares.

Due diligence: crucial for an informed transaction

For every transfer, the (legal and financial) audit is essential, especially for the transferee. The latter of course wants to know what the financial position of the company is, whether claims from the past can still be expected, what the prospects are, what the legal status of the current contracts is, as well as the status of the IP-portfolio, e, etc. This due diligence ensures that you know exactly what you are taking over and that, if necessary, you can include the required safeguards in the acquisition agreement.

We can assist you with this due diligence investigation so that you are aware of the legal and financial consequences of the proposed transaction as early as the negotiations on a merger or acquisition. We can also assist you in the drafting of agreements, such as an NDA, a takeover agreement, earn-out clauses, etc.

Tax neutrality as a goal

In most cases, an M&A transaction aims for tax neutrality. Several conditions must be met in order to achieve this. For example, the transaction may not have tax avoidance as its main objective, the provisions of Belgian company law must be complied with, etc. We can support you in carrying out a tax-neutral takeover or transfer. In addition, we can also help with the submission of a request for a ‘ruling’.

Our M&A specialists

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MERGERS & ACQUISITIONS (M&A) | Peeters Euregio Law