Merger process, Other Management

The merger process

We learnt how to aligning M and A with corporate strategy. Now, let us study how the merger process takes place. The merger process is carried out in two ways.  One is through the formation of a new company (NewCo). The other one is the merging of one or many companies into another company, with the effect that the acquiring companies keep hold of their uniqueness. The principle of merger is of a financial or business nature. The merging of two companies allows for the creation of cost synergies such as the administration, production and listing costs. It also allows for a better geological coverage with a positive impact on revenue and the likelihood of additional development. The stages of the merger process are:

1. Planning.

2. Resolution.

3. Implementation.

Now let us go through in detail with the three stages of the merger process.

Planning: The most complex part of the merger process is planning which involves analysis, action plan and negotiation with the parties involved in it. The planning stage can take any amount of time, but after its completion, the merger process is on the way. The planning stage also includes the following:

  • The signing of the letter of intent that starts off the negotiation.
  • The appointment of advisors who take part in the role of consultants, examining the strengths, weakness, opportunities and threats of the merger.
  • The maintenance of deadline, conditions and type of transaction which can be merger by integration or through the formation of a new company.
  • The maintenance of export report based on the consistency of the share exchange ratio, for the companies involved.

Resolution: The resolution stage needs the approval of the management and the shareholders involved in the merger plan. The resolution stage also includes the following:

  • The board of directors arrange meeting with extraordinary stakeholders' whose item on the agenda is the merger proposal.
  • The extraordinary shareholders' meeting is called to overtake a resolution on the item on the agenda.
  • The opposition to the merger that comes from the creditors or bondholders must be limited to within 60 days of the resolution.
  • The evaluation of the impact of the merger is undertaken by the Italian Antitrust Authority, which imposes any requirement as a precondition for approving the merger.

Implementation: It is the concluding stage of the merger process. This includes the enrolment of the merger act into the company register. The period of time occupied by the medium size or big mergers is one year from the start up of the negotiation to the finish of transaction. This is because, the issue relating to the share exchange ratio among the merger companies is hardly accepted by the parties with no drawn-out negotiation. The shareholders  possibly  will  deal  without  constraint  the  new  shares  and benefit from all rights.

Posted Date: 9/28/2012 3:04:49 AM | Location : United States

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