Many businesses use acquisition of other entities to expand their enterprises, gain larger customer bases, or bring businesses with complementary interests under one corporation. However, business acquisitions are often very complex. For this reason it is important for any company that is considering an acquisition to work with a business attorney in College Station.
How Business Acquisitions Differ from Mergers
Business acquisitions are similar to mergers in some respects, but an acquisition involves absorbing one business into another and discarding redundancies. A merger combines two enterprises for the mutual benefit of both. Ultimately, either action results in the crafting of one company from two. Whether an acquisition or a merger is to your business' best interests is a matter you need to explore with an attorney.
The Process of Acquiring a Business
The first step in acquiring a business is to recognize the need for expanding a company. Management/owners then should determine what type of business would best suit their needs. Usually an acquisition will involve another enterprise that complements the business, such as expanding its influence in a particular segment of the market. Owners then need to determine the financial health of the business in question using due diligence. The company then tenders an offer to the target company, and if terms are agreed upon, a contract is signed.
Types of Acquisitions
In most cases, acquisitions involve a single target company, and the acquiring enterprise absorbs what it needs and discards what is unnecessary. Another type of acquisition is the “split and sell,” which involves the acquiring of a business simply to gain a small portion of it. In a split and sell, a large portion of the cost of acquisition can be regained through selling off portions of the business that the acquiring business does not want.
Another type is the affiliate acquisition. This involves using an affiliate to sell and market products of the acquiring company. This can pose a danger, however, as the acquiring business might lose control of its marketing.
Work with an Attorney if You Are Planning to Acquire an Existing Business
It is very important to have the input of an experienced College Station business lawyer when you take a significant step such as acquiring a business. Call Peterson Law Group to arrange a consultation today at 979-703-7014 or 936-337-4681.
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