Mergers and Acquisitions

Matt Sumrow has represented a wide variety of businesses and their owners in connection with mergers and acquisitions, ranging in value from a few hundred thousand dollars to over one hundred million dollars. When considering a possible sale or purchase of a business, one should carefully evaluate how to best structure the transaction. The two basic ways to structure the sale of a business are either by selling the assets (an “asset sale”) or by selling an ownership interest in the company (a “stock sale” or, if the sale of stock will result in the target company merging with another company, a “merger”). If the transaction is structured as an asset sale, the buyer has the advantage of acquiring the assets of the business (physical assets, intellectual property, goodwill, etc.) without the risk of taking on any foreseeable or unforeseeable liabilities of the target company that would be acquired if the transaction was structured as a stock sale. If the transaction is structured as stock sale, there will likely be favorable tax treatment for the seller and the transaction may be structured in a way for it to qualify as a tax free reorganization under the Internal Revenue Code. Tax free reorganizations are often structured as mergers in which all or part of the consideration paid for the target companies stock is in the form of stock issued by the acquiring company.

Other issues to consider in connection with a potential merger or acquisition include:

  • the purchase price to be paid for an ownership interest in the business or the assets of the business
  • whether any portion of the purchase price will be paid out over time
  • whether the total amount of the purchase price will depend on any future events (such as requiring an additional amount to be paid to the seller if the business generates over a particular amount of revenue during a certain time period)
  • the desired ownership and management structure of the business after the merger or acquisition is completed (perhaps the sellers will want to retain an ownership interest or management role in the business)
  • the liabilities associated with the business that is to be acquired such as contractual liabilities, tax obligations and pending or potential law suits
  • conducting due diligence on all relevant business, legal and tax issues associated with the transaction (such as analyzing financial reports, corporate records and tax returns)

Contact California corporate lawyer Matt Sumrow for further information.