Careful planning leads to successful Mergers and Acquisitions
Have you considered merger and acquisition in your company? Have you wondered what you will do for your business when you retire to spend your earned retirement days? Planning and preparation are an integral part of a successful merger and acquisition, M&A.
In this article, we will tell you what an entrepreneur should consider in connection with M&A in advance of it being topical for their own company.
When is M&A profitable?
Even if the implementation of the M&A is not timely now, it is worth keeping the door open for a possible merger. With a corporate reorganization, it is possible to improve operational efficiency and direct the company’s business correctly, even if changes in the ownership base, for example, are not relevant right now.
It is a good idea to be on the move in time for M&A, as it is important to allow sufficient time for M&A to allow for careful planning and implementation within the legal deadlines. Careful planning and proper preparation are an integral part of a successful business combination, so it’s a good idea to start these activities in a timely manner when a potential arrangement becomes relevant.
What should be considered in M&A?
Mergers and acquisitions and their planning must pay particular attention to the purpose of the arrangement, because in the wrong way of implementation, the outcome of the acquisition may not correspond to the target state set for the arrangement. There are several possibilities for mergers and acquisitions. What the arrangements have in common is that they must all consider and anticipate company law, tax law and the accounting perspective.
Legislation is an integral part of M&A
Typically, the Companies Act takes a more permissive approach to mergers and acquisitions than tax legislation. As a result, some of the opportunities offered by the Companies Act are often missed in practice, as in these situations the taxes paid on the arrangement could become very high. An example of a corporate restructuring measure made possible by the Companies Act is a tripartite merger, which is not considered a merger in tax legislation. Therefore, tripartite mergers cannot be implemented in a tax-neutral manner. Prior to the implementation of a business combination, it may also be possible to apply for a preliminary ruling from the Tax Administration to determine the tax effects and minimize tax risks.
Proper planning and knowing your options are the key to a successful M&A. For example, the use of an ancillary company in certain arrangements should be considered to better arrange financing or to shorten the overall duration of creditors’ announcements in chain arrangements. The Companies Act would also allow a wider range of consideration to be used in the arrangements, but due to tax legislation, the shares of the company that received the business are most often offered as consideration, as well as a limited amount of cash consideration. In general, however, the outcome of the arrangement is more important than tax minimization, which is why it is also good to map out less typical alternatives.
Mergers and acquisitions financing
In addition to complying with legislation, for example, financing and its acquisition are often an integral part of a business combination and its preparation. The financing of corporate reorganizations must also consider the restrictions provided for in the Companies Act, such as the prohibition on financing the acquisition of own shares. In addition, in a business combination, determining the value of the company is typically necessary for the price that may be paid for the company to be correct and the transferred assets to be properly valued.
To enable financing and valuation, the company’s financial management should be kept up to date. Up-to-date financial management also enables effective financial management of the company. Thus, in addition to the actual arrangement to be implemented, there are several issues that are essentially related to the mergers and their preparation, and all of them must be successful to implement a successful M&A.
Reasons for M&A
M&A are carried out for a variety of reasons, but typical reasons include changes in the company’s business, the arrangement of ownership or financing, and the arrangement of the structure of the company or entity.
Changes in the company’s business
Corporate reorganizations suitable for business change situations include, for example, changes in the company form, various acquisitions and liquidation of the company.
Ownership or financing arrangement
Various acquisitions are also suitable for arranging ownership of a company, but for example, a reduction of share capital, share exchange and the acquisition and redemption of own shares are also suitable for arranging ownership. The company’s ownership base can be expanded with a share issue, which also makes it possible to raise capital for the company.
Arrangement of the company structure
The structure of a company or group of companies can be reorganized, for example, through a merger, division or business transfer. A merger makes it possible to merge companies and a demerger makes it possible to divide a company into two or more different companies. Business transfer is an excellent option when you want to form one company into a group.
Impact of the merger on the company’s financing and assets
In certain situations, a business combination may also have an impact on the company’s equity, in which case it may be possible to improve the company’s financial viability in the eyes of financiers. In addition, it may be possible to restructure a company’s assets and liabilities through corporate reorganizations, but special attention must be paid to creditor protection and related provisions. By combining different means and M&A options, it is possible to achieve the right outcome and set goals once the M&A has been carefully planned and prepared.
We can help with M&A
In mergers and acquisitions, organizational structure, functions, personnel and partnerships are undergoing change. We at Gallant have experience in M&A for several companies. We help to ensure the smooth running and scheduling of the M&A and to complete it successfully. We are your support in all situations related to the M&A.
If you need our advice, leave a contact request. We will be happy to help!