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U5-Mergers and Acquisition - Coggle Diagram
U5-Mergers and Acquisition
Mergers and divisions
Merger (p322-331) - both acquirer and the target are companies
merger by acquisition
upstream merger
downstream merger
side-stream merger
merger by formation of a new company
assets
leads to transfer of all assets, contracts, and liabilities into the acquiring company - comparable to asset deal
universal succession of assets - better than asset deal
contractual partners ans creditors cannot object to the transfer of their position - also better
dangerous for creditors
asset base changes
number of creditors increases
protection
via private ordering
if the merger affects the party to the contract negatively, court may provide the party with extra right to terminate the agreement - only in extreme cases
controll of mergers within a group of companies
creditors may petition the court for safeguards after the merger is registered
shareholders
vote on the deal - majority of 75% is required
In share deal, those who not agree can keep their shares, but here, once the majority agrees all shares have to be passed to the acquirer
share exchange ratio
outgoing and incoming merger
Division (p333-336)
demerger plan
full division
partial division
partial universal succession
more dangerous than merger for creditors
protection (p334)
shareholders (p335)
Overview of M&A structure
reasons for M&A
desire to retire
overtake business is better for some than to start from scratch
economy of scale
transaction process
signing
closing
Asset deal
vendor transfers the assets to acquirer
Assets (p290-293)
singular succession
transfer of tangible assets
vendor has to be proprietor of the goods
valid contract
set a modus - agree on action by which they actually transfer the property
intangible assets
"assignment of the dept"
Contracts (p294-301)
transfarable with the consent of all three parties
consequences of the transfer
all liabilities are passed to acquirer
acquirer will be entitled to demand fulfilment.
vendor is still liable to some extent
for all unpaid balance and for any future payments due within five years
situations when contracts are not transferred
personal legal relationship
contractual parties, which have to be informed about such a transfer can object without giving a reason.
Liabilities (p302-306)
after the transfer, acquirer becomes liable for all company's debts (not mandatory)
creditors are protected by successor liability
acquirer is liable for all vendors contracts
acquirer is also liable for any debts he/she knows or should have known of - this means that he/she is liable for any debts in the enterprise's book but not for non-contractual damages (liability from tort)
only possible way of transferring assets from sole trader
easy to specify which assets are transferred and which remain with the vendor
Share deal
deal structure (p308-313)
acquiring company is not directly liable for the target's debts
in case of insolvency of the target company the acquirer looses the value of target company but nothing more
returns are received only if the target company makes a profit
debt push-downs
shares of the target company become assets of the acquirer
parties to the contract
the acquirer
person holding shares in a "target company"
consideration in cash or kind
Group of companies is created if the acquirer is also a company
Assets, Contracts and Liabilities (p314-318)
as a default rule, assets, contracts, and liabilities stay with the company
private ordering
change of control clause
due diligence process
If premises are leased, landlord may not terminated the lease agreement, but is entitled to raise the rent
Minority protection in Control transactions (p319-321)
opportunity
threat
result of free transferability of shares
no duty of controlling shareholder to provide fellow shareholders with opportunity to sale their shares
Takeover law -exception for companies listed on the stock exchange