On other day we came to know about the
merger and types of merger and also about the difference between the merger and
acquisition. You can visit the links if you haven’t yet gone through
Today in this article let us try to understand about merger process
in detail.
Merger
Process
Merger Process consists of 8 steps. The 8 steps of merger process
are
§ Identifying Target
§ Narrowing and Selecting the Field of Choice
§ Reviewing Regulatory Compliance
§ Conducting Preliminary Discussion and Signing a letter of intent
§ Conducting Due Diligence
§ Completing the Financial Negotiation
§ Signing the Definite Agreement and Announcing the deal
§ Closing the transaction and Integration of Companies
Now let us try to understand the each step of Merger Process in
detail below
§ Identifying Target
In this stage
the company create a list of potential targets companies. In order to identify
the potential target companies and prepare the list of companies the company.
First company has to define the criteria internally and then has to scan the
market to identify the potential targets so that a list can be prepared and
there profiles can be developed for further investigations.
§ Narrowing the and
Selecting the Field of Choice
This is the
second stage of merger process where the company shortlist a group of companies
based on the criteria set. The profiles which were developed in the first stage
were as evaluated and studied so shortlist from the list of companies. After
the preliminary investigation and studying the various profiles from different
angles short listing of the companies the list is forwarded for further detail
study in order to have select the most appropriate target and proceed with the
rest of the merger process. And also assesses the target company business. Then
express the target company to merger with it.
§ Reviewing Regulatory Compliance
This is the
third stage of merger process. In this stage the company reviews all the legal
aspects to check out if there are any legal restrictions or not for the merger
if there are legal restrictions then either a solution is found for the merger
or dropped if no solutions arises. Also checks the legal requirements in order
to fulfill for a successful merger. And also seeks the approval of the deal
from the government. After complete verification of legal aspects the deal is
moved on to the next stage.
§ Conducting Preliminary Discussion
and Letter of Intent
This is the
fourth stage of merger process. In this stage the both companies come together
and sit down for the preliminary discussion regarding the deal and discuss
getting the approval from the Board of Directors and Shareholders of the
company. This is the first meeting to discuss about the merger. Both the
company put forward their terms and conditions for the deal. And also they
discuss the few basic things about the deal. After agreeing to each other terms
and conditions they sign a letter of intent.
§ Conducting Due Diligence
This is the
fifth stage of merger process. After signing the letter of intent companies
carryout the due diligence process which is a detailed evaluation of company
which helps to uncover the risk associated, scope of the merger and other
business aspects.
§ Completing the Financial Negotiation
This is the
sixth stage of merger process. In this stage after the due diligence is
carryout and all the clear both companies again come together to discuss about
the financial aspect of the deal. In this stage the seller tries to bit for the
highest price will the buyers tries to settle the deal at reasonable price.
Once they both come to the common or agreed price. Then the mode of payment and
exchange ratio of shares is decided. Exchange ratio is one of the important factors.
§ Signing the Definite Agreement and
Announcement of Deal:
This is the
seventh stage of merger process. In this stage after the financial negotiation
both the companies company together and sign an agreement which states that the
both companies are going to merger. After the agreement both the companies’ official
declares about the merger deal.
§ Closing the transaction and
Integration of the Companies
This is the eighth stage. In this
stage company makes the payment and closes the deal. Once all the transactions
of the closing are completed the integration process begins and the company in
few months is integrated and then they start to operate together after merger.
During the merger process both the companies will remain functioning
independently and operations are not affected you the merger the merger
process.
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