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What is a Merger?
The word Merger has a strictly legal
meaning and has nothing to do with how the combined companies
operate in the future. A merger occurs when one corporation is
combined with and disappears into another corporation. All mergers
are statutory mergers, since all mergers occur as specific formal
transactions in accordance with the laws, or statutes, of the
states where the companies are incorporated. The post-transaction
operations or control of a company has no relevance on whether
a merger has occurred or not.
What is an Acquisition?
An Acquisition is the process by which
the stock or assets of a corporation become owned by a purchaser.
The transaction may take the form of a purchase of stock or a
purchase of assets.
What's the difference between a Merger and
an Acquisition?
An Acquisition is the generic term
used to describe a transfer of ownership, and Merger is a distinctive,
technical term of a particular legal procedure that could or could
not happen following an acquisition. It is far more common for
an acquisition to occur without a following merger in today's
marketplace.
What is a Leveraged Buyout?
A Leveraged Buyout (LBO) is a transaction
whereby a company's stock or assets are purchased with borrowed
money, making the company's new capital structure include a high
percentage of debt. An acquisition of all the selling company's
stock, usually by a newly-formed corporation created for the sole
purpose of the acquisition, is followed immediately by a merger of
the buyer's new company with the acquired company, so that the
assets of the acquired company become available to the buyer to
secure debt.
What is an Earnout?
An Earnout is a method of compensating
a seller based on the future earnings of a company. It is the
contingent portion of the purchase price. A common type of earnout
provides for additional payments to a seller if the earnings exceed
agreed-upon levels. Another type of earnout may provide that certain
debt given to the seller as part of the acquisition price be paid
out early if earnings exceed agreed-upon levels.
What are the different forms of transactions?
There are three general types of transactions
in the acquisition of a business. The purchase of the assets of
the business, the purchase of the stock of the business owning
the assets, and a merger of the buyer with the business.
What is an Asset Transaction?
The acquired company transfers the
assets of the business to the purchaser. These could include equipment,
inventory, and real estate, as well as intangible assets such
as contract rights, leases, patents, trademarks, etc. These could
be all or a portion of the assets owned by the selling company.
The acquired company executes the specific types of documents
necessary to transfer the assets, such as deeds, bills of sale,
and assignments.
What is a Stock Transaction?
The seller transfers the shares in
the acquired corporation to the purchaser in exchange for an agreed-upon
payment. A Stock Transaction is appropriate when tax costs or
other problems of doing an asset transaction make an Asset Transaction
less appealing.
Why VR M&A?
VR M&A fills the void between general
business brokerage and the investment banks. Specializing in transactions
valued between 2 and 15 million dollars, VR M&A supplies its clients
access to a network of highly trained professionals that, by virtue
of being part of the VR network, have the resources required in
this specialized market. VR Mergers & Acquisitions has forged
strategic alliances with the world's top three investment banking
firms, enabling us to provide our clients access to a lucrative
network of qualified, professional buyers worldwide.
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