A Business Merger May Be Used To Gain Market Prominence

On behalf of The Law Office of Lynnette Ariathurai, A Professional Corporation posted in Mergers & Acquisitions on Friday, December 11, 2015.

Mergers and acquisitions are happening quite regularly in California and nationwide as companies vie for new market positions, cost-cutting expenses and opportunities for diversification. There are several other potential benefits that companies look for when searching for a potential business merger. There is an element of risk-taking in the process because it is impossible to predict the outcome for certain.

A merger occurs when two corporations join together in a legal process where one of the corporations survives and the other disappears. This transformation impacts on several groups, including shareholders, customers, employees and the communities. The shareholders of each company generally have the ability to decide whether they want to maintain an interest in the new entity, by either holding their shares or divesting them. Shareholders of the company being consumed will decide whether they want to take cash or stock in the acquiring company.

Shareholders in the buying entity must decide whether to keep their shares and possibly buy more shares, or to sell them. Employees may be significantly affected as some of them will usually face the ill fate of being terminated in cost-cutting procedures. The terminated employees will also face other decisions, such as how to handle retirement benefits and where to get health coverage that is affordable. A merger can be an important strategy in a company's path to market dominance.

Whether it is carried out here in California or in another state, a business merger may entail legal ramifications that may invoke the state and federal antitrust laws. Where there are indications of monopolistic control of a market, federal authorities generally take the lead position in an anti-trust investigation of a proposed merger. The federal government will conduct a rigorous evaluation to determine whether the transformation will result in a prohibited monopoly. An experienced mergers attorney is the indispensable leader of the team of professionals that will guide and protect the company's rights through the process.

Source: pennlive.com, "Impact of mergers & acquisitions is widespread:", Robert E. Caplan, Dec. 6, 2015

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