Examining the Different Types of Business Mergers and Acquisitions

DuPage County mergers and acquisitions lawyerMergers and acquisitions are highly misunderstood legal terms, and are often considered to be synonymous among small business owners and the general population. However, there are some distinct differences between the two; understanding them and how they change the dynamics of a business transaction can be critical for ensuring a company’s future success.

Mergers

A merger is a business transaction in which two companies join together to form one company. Many times, one of the two companies ceases to exist. One example is the2007 merger between Digital Computers and Compaq in which Digital Computers was absorbed by Compaq.

Yet, not all mergers are the same. Instead, there are five types of mergers, all of which are listed and described below:

  • Horizontal merger. This involves two companies in direct competition with one another, both in market and product line.
  • Vertical merger. This is an agreement between two companies in a similar industry, but different type of business. An example would be a merger between a framing company and a drywall company.
  • Market-extension merger. An agreement between companies in different markets but with similar products.
  • Product-extension merger. An agreement between companies in similar markets that sell distinct products.
  • Conglomerate merger. Two companies with seemingly nothing in common merge. An example would be an electronics company merging with a company that sells car parts.

Acqusitions

An acquisition is a business transaction in which one company purchases another company. The latter of ceases to exist. In this scenario, the buyers take over the operations and decision-making of the purchased company. Many times, acquisitions have negative connotations, while mergers are viewed in a positive light. Whatever the case may be, it’s important to know that there are three main acquisitions

  • Strategic Remix acquisition. This is an agreement in which the acquired asset, including operations and product line, are combined with an existing business to increase profit.
  • Private Equity acquisition. This is when a company buys another business at a cheap price, pumps it full of resources, and then sells it at a higher cost.
  • Alphabet acquisition. An agreement between two companies that is a hybrid of the other two types of acquisitions. When this happens, the buyers take on the operations and product line of the acquired company with the intention of waiting to see how the acquired company does. If they improve, the buyers have the choice to sell or pump in more resources and potentially keep running the company for their own profit.

If you are looking to enter the world of mergers and acquisitions, contact Stock, Carlson, Oldfield & McGrath, LLC. Backed by more than 40 years of legal and business experience, our Wheaton small business attorneys can help you make informed decisions about your organization’s future. As a small business ourselves, our legal team knows how important a transaction like this can be for your business’ future. Call 630-665-2500 to schedule a consultation with our office today.

Sources:

https://www.investopedia.com/terms/m/mergersandacquisitions.asp

https://www.investopedia.com/terms/m/mergersandacquisitions.asp

https://www.investopedia.com/terms/m/mergersandacquisitions.asp

 

Critical Steps to Take When Dissolving Your Business

DuPage County business law attorneysClosing a business is a complex, multi-step process that must be done with the utmost efficiency. Failure in any aspect can result in serious consequences with both legal and financial implications. If you are facing the closure of your business, the following information can help. It also explains where and how to find experienced assistance.

Creating an Exit Strategy

No two companies are exactly the same, and it is unlikely that any two will go through closure in exactly the same way. This is why exit strategies are so critical. An outline of whom you will need to talk to, tasks that will need to be completed, an overview of what you hope will come of the closure, and an examination and possible solutions to any issues that may arise, this critical step can help to ensure you have covered all the aspects of your company's closure. It can also help you stay focused on the next task at hand as you navigate through the arduous process.

Dealing with Partners, Investors, and Employees

Unless you are a sole proprietor, the closure of your business is likely to affect many others, including any investors, partners, or employees. Partners must be a part of your final decision, and the conclusion should be documented in writing. Investors who have not received their agreed upon share should be consulted with to ensure you are not left indebted to them. Employees should be given notice of the closure so they have time to secure new employment. You must also comply with all labor laws and supply them with their final paychecks upon their last day of employment. If you have any questions or concerns about how to work with your partners, investors, or employees during a closure, speak to an experienced business law attorney for advice and assistance.

Settling Your Financial Obligations

Closing a business does not release you of any financial obligations you may have. You must still notify the Internal Revenue Service and pay any owed taxes. You must also contact creditors and those that currently owe you funds for services or products rendered to either settle or comp up with a payment arrangement you can each live with. If you cannot do this successfully, an experienced business law attorney may be able to negotiate the matter on your company's behalf.

Contact Our Experienced DuPage County Business Law Attorneys

At Stock, Carlson, Oldfied & McGrath, LLC, we take a personalized approach to ensure your company's best interests are preserved. This applies, regardless of whether you are starting a new business, negotiating contracts, or closing down. Learn more about how our seasoned DuPage County business law attorneys can serve your company. Call 630-665-2500 and schedule your consultation with us today.

Sources:

https://www.irs.gov/businesses/small-businesses-self-employed/closing-a-business-checklist

https://www.sba.gov/managing-business/closing-down-your-business/steps-closing-business

Steps to Dissolving a Business

Illinois business law, federal business laws, Illinois business lawyer,If you are considering dissolving your business, there are many things to be aware of before you begin the proceeding. The first is that you should speak with a business attorney to determine the bests steps to take and whether or not your business is applicable for tax breaks and what financial legal burdens you have to handle before you walk away. Also be aware that you have to file an annual tax return for the year that you go out of business, even if your business closes in the first quarter. Other financial burdens that must be resolved include the closing of all accounts and the resolution of all business debt.

These tax returns are in addition to the reports that you must file to officially dispose of your business, which must be filed no matter what type of business you operate. This is true for a corporation, S corporation, LLC, or trust. If you fail to file these dissolution papers, you could still be liable to pay taxes and filings. If you are operating as a partnership or sole proprietorship, you may not be required to fill out these dissolution papers. If you have any question as to whether or not you should file these, it should be discussed with a legal professional.

Another major step is to make sure that you have canceled all registrations, permits, licenses, and business names. This ensures that you will no longer be responsible for any additional payments and responsibilities. Most of these filings will be done at the state or local level, which is why it is important to work with a legal professional who is in your area and familiar with local laws.

The next step to closing a business it to make sure that you have complied with all employment and labor laws. The Worker Adjustment and Retraining Notification Act (WARN), for example, requires that all employers who have 100 or more employees provide at least 60 days (two month) written warning that the business will be closing.

If you or someone you know is considering closing a business, the most important step is to seek legal counsel. Contact an experienced DuPage County business attorney today. Call the Law Office of Stock, Carlson, Oldfield & McGrath LLC 630-665-2500 to schedule a consultation.

Sources:

https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Closing-a-Business-Checklist

https://www.sba.gov/content/steps-closing-business