Mergers are complicated and to be properly implemented they require mergers and acquisitions lawyers that have a lot of experience and knowledge of the legalities surrounding mergers. Whether it is to draft and implement agreements between the merging companies, or to assist in the compliance of the merger, a mergers and acquisitions lawyer is essential.
In this article, we will discuss commercial and contract law and how it pertains to mergers, why mergers can be a lucrative exercise for the parties involved and provide an example of a successful merger.
Commercial vs Contract Law
Commercial law typically pertains to transactions within the business world. It specifies certain legal principles that must be applied in order to assure compliance when commercial transactions take place. Contract law is a branch of commercial law that specialises in contracts that are compiled and entered into when one performs a business transaction.
Contract law is extremely important when it comes to mergers and require a skilled attorney to ensure that every aspect of a merger is compliant.
What is a Merger?
A merger refers to two separate companies that join to form an entirely new company. This will often result in both companies leaving their previous names behind and choosing a new name. There are various different types of mergers, that occur for different reasons, and accomplish different goals. However, one of the most common goals strived for is company growth.
There are five major types of mergers that consist of:
- Vertical: When two companies within the same supply chain merge.
- Horizontal: When two companies that are in the same industry, often selling similar or the same products or services merge to become one.
- Conglomerate: Refers to more than two companies merging into one. These companies often don’t have related products, services, or industries.
- Congeneric: This refers to the merger of two companies in the same industry or market that overlap in the services they provide or products they sell but are not exactly the same.
- Market Extension: Two companies that sell the same product or service but in different markets (i.e. a different country) will perform a merger to expand their market reach.
Other benefits that mergers can offer companies include an expanded reach, increased market share, industry and market expansion, supply chain efficiency, cost and quality control and much more.
Example of Mergers
A good example of a merger that had a positive and lucrative ending for those involved, is the Exxon and Mobil merger. Both of these companies were oil producers in the United States, taking up the first- and second-largest producer spots in the country. Their name changed to ExxonMobil and due to the merger, their shares skyrocketed by a 293% increase. Due to this, this merger is regarded as one of the most successful mergers to occur.
To find out more about mergers and how a mergers and acquisitions lawyer can assist you in your merger, contact us at Adams & Adams