Mergers and Acquisitions Lawyers: Why They Are Important for Success

Mergers are complicated and to be properly implemented they require mergers and acquisitions lawyers that have a lot of experience and knowledge of the legalities surrounding mergers. Whether it is to draft and implement agreements between the merging companies, or to assist in the compliance of the merger, a mergers and acquisitions lawyer is essential.

In this article, we will discuss commercial and contract law and how it pertains to mergers, why mergers can be a lucrative exercise for the parties involved and provide an example of a successful merger.

Commercial vs Contract Law

Commercial law typically pertains to transactions within the business world. It specifies certain legal principles that must be applied in order to assure compliance when commercial transactions take place. Contract law is a branch of commercial law that specialises in contracts that are compiled and entered into when one performs a business transaction.

Contract law is extremely important when it comes to mergers and require a skilled attorney to ensure that every aspect of a merger is compliant.

What is a Merger?

A merger refers to two separate companies that join to form an entirely new company. This will often result in both companies leaving their previous names behind and choosing a new name. There are various different types of mergers, that occur for different reasons, and accomplish different goals. However, one of the most common goals strived for is company growth.

There are five major types of mergers that consist of:

  • Vertical: When two companies within the same supply chain merge.
  • Horizontal: When two companies that are in the same industry, often selling similar or the same products or services merge to become one.
  • Conglomerate: Refers to more than two companies merging into one. These companies often don’t have related products, services, or industries.
  • Congeneric: This refers to the merger of two companies in the same industry or market that overlap in the services they provide or products they sell but are not exactly the same.
  • Market Extension: Two companies that sell the same product or service but in different markets (i.e. a different country) will perform a merger to expand their market reach.

Other benefits that mergers can offer companies include an expanded reach, increased market share, industry and market expansion, supply chain efficiency, cost and quality control and much more.

Example of Mergers

A good example of a merger that had a positive and lucrative ending for those involved, is the Exxon and Mobil merger. Both of these companies were oil producers in the United States, taking up the first- and second-largest producer spots in the country. Their name changed to ExxonMobil and due to the merger, their shares skyrocketed by a 293% increase. Due to this, this merger is regarded as one of the most successful mergers to occur.

To find out more about mergers and how a mergers and acquisitions lawyer can assist you in your merger, contact us at Adams & Adams

 

The Laws and Acquisitions in South Africa: Types of Acquisitions

In the world of corporate finance, an acquisition is considered to be a transaction in which an individual or entity (company) purchases some or all of the shares of a business. In South Africa, mergers and acquisitions are in part regulated by the Companies Act No 71 of 2008 (Companies Act). Acquisitions are a popular way to encourage business growth, diversification of business, increased market share within an industry, certain cost reductions and more.

In this article, we will discuss the law relating to acquisitions in South Africa, the different types of acquisitions that can be implemented, what the purpose of each is, and why one would require when an acquisition is taking place.

Types of Acquisitions in South Africa

There are 4 types of acquisitions that can be performed, and each is employed for a different reason. These 4 types of acquisitions consist of:

Vertical Acquisitions

A vertical acquisition refers to a company either acquiring a business above or below it in their supply chain. This is typically done because it is cost-effective in the long run. It is also more efficient to purchase an existing company than to build one. Thus, it would be beneficial to the manufacturer if they purchased a distributor.

Horizontal Acquisitions

A horizontal acquisition takes place when one company acquires another company that offers similar or perhaps the same products or services as them. This is typically done to increase a company’s market share or remove its competitors from the market.

Conglomerate Acquisitions

Conglomerate acquisitions occur when a company is acquired by another company that has nothing in common with it. Thus, they are not competitors nor are they within the same supply chain. Conglomerate acquisitions often occur when a variety of companies fall under the same umbrella or have the same parent company. This is done to ensure stability within the market as it is very rare that all of the industries will take a dip at the same time; thus, it acts as a sort of safety net.

Market Extension Acquisitions

If companies that are in the same industry but are not servicing the same market enter into an acquisition it is known as a market extension acquisition. This is because the company is broadening the market it services, without the hassle of entering a different market as a competitor.

Mergers and Acquisitions Lawyers: Why They Are Needed

Mergers and acquisitions lawyers are essential when it comes to acquiring another company or selling shares in a company. There are fine details that should be checked before signing contracts, and above all it must be ensured that the acquisition process is compliant with the law.

To find out more about mergers and acquisitions law in South Africa, contact Adams and Adams.