After due diligence is completed, the parties may proceed to draw up a definitive agreement, known as a "merger agreement", "share purchase agreement" or "asset purchase agreement" depending on the structure of the transaction.Such contracts are typically 80 to 100 pages long and focus on five key types of terms: Professionals who value businesses generally do not use just one of these methods but a combination of some of them, as well as possibly others that are not mentioned above, in order to obtain a more accurate value.In a "forward triangular merger", the buyer causes the target company to merge into the subsidiary; a "reverse triangular merger" is similar except that the subsidiary merges into the target company. The documentation of an M&A transaction often begins with a letter of intent.
Mergers, asset purchases and equity purchases are each taxed differently, and the most beneficial structure for tax purposes is highly situation-dependent.One hybrid form often employed for tax purposes is a triangular merger, where the target company merges with a shell company wholly owned by the buyer, thus becoming a subsidiary of the buyer. Internal Revenue Code, a forward triangular merger is taxed as if the target company sold its assets to the shell company and then liquidated, whereas a reverse triangular merger is taxed as if the target company's shareholders sold their stock in the target company to the buyer.Extracting technological benefits during and after acquisition is ever challenging issue because of organizational differences.Based on the content analysis of seven interviews authors concluded five following components for their grounded model of acquisition: An increase in acquisitions in the global business environment requires enterprises to evaluate the key stake holders of acquisition very carefully before implementation.A reverse merger occurs when a privately held company (often one that has strong prospects and is eager to raise financing) buys a publicly listed shell company, usually one with no business and limited assets.
The combined evidence suggests that the shareholders of acquired firms realize significant positive "abnormal returns" while shareholders of the acquiring company are most likely to experience a negative wealth effect.An additional dimension or categorization consists of whether an acquisition is friendly or hostile.Achieving acquisition success has proven to be very difficult, while various studies have shown that 50% of acquisitions were unsuccessful.From a legal point of view, a merger is a legal consolidation of two entities into one entity, whereas an acquisition occurs when one entity takes ownership of another entity's stock, equity interests or assets.From a commercial and economic point of view, both types of transactions generally result in the consolidation of assets and liabilities under one entity, and the distinction between a "merger" and an "acquisition" is less clear.An asset purchase structure may also be used when the buyer wishes to buy a particular division or unit of a company which is not a separate legal entity.