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Understanding mergers and acquisitions

Mergers and acquisitions are transactions in which the ownership of a company changes, or is transferred to another business organization. These transactions allow companies to globalize, grow and shrink according to the market's requirements. Mergers are the combination of two business entities into one larger entity, while acquisitions are takeovers where one entity gives up ownership to another. The process is fairly complicated because there is a lot at stake, and several laws and departments are in place to monitor such deals.

Fair competition and antitrust laws apply in cases of mergers and acquisitions. These laws seek to maintain market competition, making sure that the conduct of businesses promotes a fair market that is beneficial for the consumer. The Federal Trade Commission oversees all transactions and makes sure all laws are followed in the process. Questions arise when the market share is too high for a single entity, making it difficult for other businesses to compete. The commission has the right to intervene if it feels a merger/acquisition will not be beneficial for the market.

The Securities and Exchange Commission is another department that plays a major role during mergers and acquisitions. The department makes sure all purchases are made using legal means. Any inappropriate conduct, like devaluation of stocks, insider trading or offshore transfers may be penalized by the SEC.

If you are part of company that is about to enter into a major transaction, you might want to involve and experienced attorney who specializes in mergers or acquisitions. Attorneys play important roles during evaluation and negotiations during the deal. Having the expertise of an attorney on your side might just get you a favorable deal.

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