Kristi Darnell-Weichelt

Darnell-Weichelt, Kristi Lynn_photo_3835.jpgCONTRIBUTED BY
Kristi Darnell-Weichelt
kristi.darnell@dlapiper.com

As highlighted in an earlier post, there are a number of factors both buyers and sellers of companies should consider when structuring a purchase and sale transaction. If a buyer and seller have decided to pursue a merger structure (as opposed to, for example, an asset sale, or a purchase of all of the stock of a company directly from the company’s stockholders, each of which has different liability exposures and tax implications), there is still another level of analysis that will need to be performed regarding the actual structure of the merger.

In all merger transactions, one entity legally merges into another entity, resulting in the surviving entity holding all of the assets and liabilities of the merged company. As opposed to an asset sale where assets are formally transferred to another company, the “business” in a merger transaction is acquired by operation of law. Similarly, unlike a direct purchase of stock from a company’s stockholders, a merger transaction typically does not require 100% approval by the target company’s stockholders (the actual approval threshold will be dictated by applicable state law, the target company’s charter documentation, and the terms negotiated into the merger agreement by the buyer and seller).Continue Reading Selling Your Company: Comparing Merger Structures