Mergers and acquisitions

Mergers and acquisitions are often extensive, intensive and complex processes involving significant financial interests. For companies considering a merger or acquisition, sound legal advice is essential to the success of the transaction. A mergers and acquisitions solicitor is a legal specialist who assists companies in a wide range of areas. The M&A solicitors at Fruytier Lawyers in Business distinguish themselves as sparring partners with commercial awareness and excellent knowledge of the market. We would be happy to tell you more about our successful approach

What does a merger entail?

A merger is when two or more companies join together to form a single company. This can be done to strengthen their position, save costs, improve their market position or exploit new growth opportunities. Mergers can take various forms, such as the merger of companies in the same sector (horizontal), at different stages of the production chain (vertical) or even between companies in completely different sectors (conglomerate). Mergers are often regulated and require the approval of the parties involved and regulatory authorities.

Companies can merge in different ways. In general, mergers can be divided into two types:

Legal merger:

In a legal merger, the companies involved remain separate entities but enter into a formal legal agreement setting out the terms and effects of the merger. One of the companies continues to exist legally, while the other is absorbed into the surviving entity.

De facto merger:

In a de facto merger, companies actually merge into a single entity. No formal legal structural change is implemented, but the activities, resources and operations are integrated without either company continuing to exist legally.

A merger always has a clear purpose. For example, companies may seek a merger to exploit growth opportunities, strengthen their market position and diversify their product range or service portfolio. Access to talent and expertise and the creation of financial value can also be reasons for a merger.

We generally refer to five different types of mergers:

1. Horizontal merger: Merger of companies operating in the same market segment.
2. Vertical merger: Integration of companies operating at different stages of the same production or distribution chain.
3. Conglomerate merger: Merger between companies with no direct relationship in terms of products or services.
4. Market expansion merger: Merger with the aim of entering new markets or expanding market share.
5. Product expansion merger: Merger aimed at broadening the product range.

Frequently asked questions about mergers

A company merger is a complex process. In addition to the combination of two or more companies, a merger involves various legal, financial and operational aspects. All these elements must be properly managed in order for a merger to succeed. A mergers and acquisitions solicitor assists the parties during the process and offers active guidance in numerous areas. To avoid any uncertainty surrounding mergers, we have listed a number of frequently asked questions about a company merger.

What happens in a merger?

In a merger, two or more companies join together to form a single company. The assets, liabilities, personnel and customers of both companies are transferred to the new company. The two companies cease to exist as legal entities.

The merger can take various forms. In the most common form, a share merger, the shares of one company are transferred to the other company. Another form of merger is a business merger. In a business merger, the assets and liabilities of one company are transferred to the other company.

Is a merger a transfer?

No, a merger is not a transfer, but rather a combination of two or more companies into a new joint company. In a merger, the companies involved combine assets, liabilities and rights to form an integrated, new entity. Unlike a transfer, where one company sells its assets, in a merger all parties involved retain a certain degree of ownership in the resulting company.

What is the difference between a merger and an acquisition?

A merger is the combination of two or more companies into a new, joint company, with both parties combining assets and liabilities. In an acquisition, one company gains control of the other by purchasing a majority of its shares. In a merger, both parties retain a certain degree of ownership, whereas in an acquisition, the acquiring company gains control of the acquired company and often obtains complete control.

What are the reasons for mergers and acquisitions?

There are various reasons for mergers and acquisitions. The main reasons for a company merger or acquisition are:

1. Strengthening market and competitive position
2. Cost savings and economies of scale
3. Access to new markets and knowledge
4. Increasing technological expertise
5. Developing new products and services

When is regulatory approval required for a merger, acquisition or joint venture?

If certain conditions apply to the seller, buyer or merger partner, prior approval from regulators or other relevant authorities may be required for an acquisition or merger. For example, a merger, acquisition or joint venture may constitute a “concentration”. If so, approval from the regulator is required. In many cases, prior approval must be requested from the Netherlands Authority for Consumers and Markets (ACM). Whether a concentration exists depends on whether the parties involved exceed certain turnover thresholds:

• A combined turnover of €150 million and
• At least two of the parties involved have a turnover of at least €30 million in the Netherlands.

In sectors such as healthcare, energy, telecommunications or financial services, additional reporting obligations or approval requirements may apply.

How can you protect your company during a merger or acquisition?

Protecting your company during a merger or acquisition starts with good preparation and establishing clear agreements. A good confidentiality agreement or Letter of Intent is essential in this regard. Before exchanging (confidential) business information, have a well-formulated non-disclosure agreement (NDA) signed. It is also advisable to agree with the other party on an exclusivity period during which no discussions may be held with other parties. Then ensure a thorough due diligence process in which you, as the seller or buyer, provide or check all relevant information. If the parties reach an agreement, it is important that guarantees and indemnities are also included in the purchase agreement, so that you are not held liable afterwards for hidden debts or legal claims, for example. Protecting your interests as a seller becomes even more important if part of the purchase price is paid later, for example through an earn-out. In that case, it is important to make extra clear agreements with the buyer about the terms of this earn-out and how you, as the seller, can obtain certainty about the payment.

Finally, engage an experienced advisor in good time. They will not only monitor your legal position, but also think strategically about risks and room for negotiation. This prevents surprises and strengthens your negotiating position.

How does an acquisition process work?

Every acquisition process is unique – just like every merger and every company. The course of the acquisition process is broadly similar. The process of a merger or company acquisition can be divided into the following steps:

1. Planning and preparation: The buyer identifies strategic goals and determines the type of companies that are suitable for acquisition.
2. Selection and strategy: The selection of potential “targets” that align with strategic goals based on market research and evaluation.
3. Negotiations: The buyer approaches the selected parties and begins negotiations on terms, including price, financing and other relevant aspects.
4. Due diligence: A thorough investigation of the target to understand all aspects of the company, including finances, legal matters, operational processes and potential risks.
5. Drafting the final agreement: After successful negotiations and positive due diligence, a final agreement is drawn up with all the details of the transaction.
6. Approval of acquisition: In some cases, approval is required from shareholders, regulators and other relevant authorities.
7. Transfer of control: The transaction is completed, with the acquiring company taking control and beginning the integration of operations.
8. Integration of business operations: The merging of business operations, systems and staff.

Valuation in mergers and acquisitions

One of the most important aspects of mergers and acquisitions is valuation. Valuation is the process of determining the financial value of a company. Valuation is usually carried out by financial experts or business analysts and generally takes place during the due diligence phase. During this period, the target company is thoroughly examined by the buyer. The advice and findings of specialists, such as a merger and acquisition solicitor, are crucial during the negotiation phase and when determining the final terms of the transaction.

Assistance with mergers or acquisitions

The solicitors at Fruytier Lawyers in Business have extensive experience and legal expertise in assisting with mergers, demergers and company acquisitions. We take all our clients’ interests into account, as we have all the necessary disciplines on board in the field of both purchase and sale assistance.

We are often involved in providing legal guidance on the sale of our clients’ businesses. If necessary, we do so in consultation with other professionals, such as accountants, tax specialists or corporate finance consultants, so that we do not lose sight of our clients’ financial and tax interests. A mergers and acquisitions solicitor advises on setting up joint ventures, organising management buy-outs/management buy-ins and often advises on complex acquisitions of, for example, family businesses.

Assistance with company mergers and acquisitions

We assist clients with, among other things, conducting due diligence investigations in connection with company acquisitions, maintaining contact with prospective buyers and sellers, and drafting letters of intent (LOIs). We also regularly act as advisors in share transactions, asset/liability transactions, SME acquisitions and similar transactions.

We believe it is important that mergers and acquisitions are not made more complicated than necessary and that efficiency is paramount. We take all our clients’ interests into account, as we have the necessary disciplines on board. A mergers and acquisitions solicitor at Fruytier Lawyers in Business is characterised in every case by a creative and pragmatic approach and has knowledge of entrepreneurs and their businesses.

M&A solicitor: our specialists

Our specialists in mergers and acquisitions are Marcel Fruytier and Myrddin van Westendorp. If you would like additional information or tailored advice, please contact us. We would be happy to arrange an exploratory, no-obligation meeting with you.

Everything you need to know about mergers and acquisitions

• Non-disclosure agreement (NDA)
• Acquisition of customer base in company takeover
• Letter of intent in merger and acquisition
• Share transaction and asset and liability transaction
• Drawing up a company takeover contract
• Financing a business acquisition
• Forms of mergers and acquisitions
• Guarantees and indemnities in acquisitions and mergers
• Orientation phase of an acquisition
• Due diligence: the due diligence investigation
• Transfer of undertaking

Recent transactions 2019: M&A and Banking