Mergers-&-AcquisitionsMergers & acquisitions (M&A) are simply the transfer of the assets, liabilities and ownership of a business. Businesses are complex on every level and as such, mergers & acquisitions can be equally intricate. Even a standard transaction– for example a private company looking to transfer an existing business to a newly created separate subsidiary– although seemingly simple, is full of complexities.It is often quite difficult to account for all of the business’ assets, financial resources, debts, legal rights and legal limitations.

As previously mentioned, M&A is the transfer of a business from the ownership of one entity to the ownership of another entity. A business could be considered to be any single asset that also produces a continuous or predictable revenue. In turn, any transfer of an asset of this nature involves M&A law.

The laws governing mergers and acquisitions are complex and the agreements necessary in these transactions are just as intricate. Our corporate attorneys have experience dealing with mergers and acquisitions and representing buyers and sellers alike. Contact our mergers and acquisitions attorneys to learn more about to protect your interests in the sale or purchase of a business.

Mergers vs. Acquisitions

Mergers & acquisitions are the legal methods by which distinct corporations become one corporation, unified through shared assets. In spite of the popular phrasing of mergers & acquisitions, there is a subtle, yet important distinction between the two legal devices.

An acquisition occurs when one Illinois corporation absorbs the assets, debts, rights and liabilities of another one. Foreclosure is a good example of acquisition, in that both actions take in the ownership of a separate entity. The defining difference though is that a foreclosure involves the change in ownership of a residential or commercial property whereas acquisition involves the change in ownership of a business or corporation. During acquisition, as opposed to foreclosure, the surviving party receives nontangible assets aside from ownership status, such as the rights, liabilities and privileges of the former corporation. An acquisition may also be thought of as a complete purchase of all the stocks and assets of another corporation.

A merger, on the other hand, takes place when two distinct company mutually agree to become a single corporation. The volition component of a merger is the primary distinction from an acquisition, which is predicated on a transactional behavior. Mergers of equals occurs when these two businesses also replace prior stocks with new stock shares, under the control of both parties. A merger of equals though is an uncommon event though, since most corporations will simply sell their stocks and assets to another corporation. A merger can also define a smaller business transaction, such as a joint purchase deal between two different CEOs.

Liabilities of the Buyer

When a corporation acquires another company’s assets, the buyer is most always not held liable for the seller’s liabilities and debts. Important exceptions to this general rule are the following:

  • If the buyer has made a previous agreement with the seller to incur debts and liabilities for the purpose of receiving a reduced sales price for this action
  • In the scenario of a fraudulent sale, where the seller fails to provide sufficient funds or pay outstanding debts
  • If the sale is actually just a merger and acquisition of two seperate businesses, known as a “de facto” merger (these circumstances usually don’t follow Illinois state laws on mergers)
  • In the event of “mere continuation” between the buyer and seller
  • In scenarios where the Buyer does not comply with Illinois “Bulk Sales” requirements (which require Buyer to notify Seller’s creditors of the sale, within a specific time, before it takes possession of the assets or pays for the assets)