8 Stages of the Merger Process

          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

§  Merger and Types of Merger

§  Difference between Merger and Acquisition

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.