MERGERS AND COMPANY’S ACQUISITIONS
Fusiones y adquisiciones de empresas en Valladolid
Confidence on both political and corporate scenarios on year 2017, rush the Company’s agreements on MERGERS AND BUSINESS ACQUISITIONS.
In fact, yhe abundance of available capital at such low rates and the pressure of investors to generate growth will increase this kind of operations.
To systematize these concepts, we mean by Companies` Merger the legal and financial union of two or more Companies disappearing at least one of them.
An Acquisition lies in the purchase and sale of shares between two Companies, while retaining each one's legal personality.
We may classify those mergers, base don the competitive relationships between the merging parties, as follows:
- a) Pure: When two similar size Companies dissolve and create a new firm (A+B=C).
- b) Por Absorción: One Company acquires another Company that produces and sells an identical or similar product in the same geographic area and thereby eliminates competition between the two firms. One of them disappears and the other one absorbs its patrimony (A+B=A´).
- c) Por Aportación parcial del Activo: A Company (A) contributes part (a) of its assets for a merger with another company (B); From this point, it may happen that either a new society (C) is generated, so: a + B = C; or the Company (B) with which it has merged part of its patrimony (a) has increased its size (B '). It is necessary that the Company that contributed the asset does not dissolve.
Regarding on the reasons for a Company to undertake a merger, they are varied, among others:
- Gainning a powerfull position in the market: the merger seeks to reduce competition, to control different stages of the production cycle, or even enter a country to avoid its strong barriers to entry.
- Fianancial Goals: ranging from getting tax incentives (exemptions or bonuses) to controlling new resources, and reducing costs with new synergies or also replacing the management team.
¿Thinking in mergers and company’s acquisitions? Consúltenos
It implies buying part of the shareholders equity from another Company for the purpose of total or partial domination. The level of control will depend on the percentage of capital stock acquired and how the Company is structured.
The two main formulas for Acquisition (aside from a conventional purchase-sale) are:
LBO Leverage Buy-Out: It deals to use some mechanics (the regular one is Debt) to increase the amount of money that may be set aside for an Investment.
This Debt is secured by the buyer's Equity or Credit capacity, the Assets of the acquired Company and its future Cash Flows.
If the managers themselves are those who buy, we would talk about MBO or Management Buy-Out, and its purpose is to reorient the Company in the direction they consider.
- Public Offer: in this case a Company launches an offer to the shareholders of another Company to buy all or part of the Share Capital.