Bergman Dacey Goldsmith

310-470-6110

Mergers: Know what they are and how they work

As you may know, businesses are regulated by state and federal law. To make sure your business is doing everything by the books, it's a good idea to talk to your attorney and go over your business plan, taxation schedule, employment practices and other aspects of your business.

One thing that your business may want to do in the future is to complete a merger. If you're getting to the point where you want to merge with another business entity, then you need to make sure your attorney is on board to protect your interests.

What happens in a merger?

Mergers don't refer to two businesses coming together as an entirely new business or as a partnership. Instead, it refers to one business absorbing another, so the latter no longer exists. For example, a larger corporation that does similar work as your business may want to pay you to have your business merge with theirs. It cuts down on competition, helping the larger business maintain its greater interest.

A good example of a merger would be when the Walt Disney Company merged with Fox. By merging, the Walt Disney Company took over a number of popular television shows and series, including Marvel superheroes and The Simpsons. Companies do have to be cautious with mergers, though, because if a company has a monopoly, it must be through legal means.

A monopoly occurs when one company has exclusive control over a particular market: for instance, if Disney owned all animation rights in the country. As long as those rights or services are obtained through legal means, then that's fine. However, if improper conduct or predatory acts lead to mergers, then the monopoly may be illegal.

What should you do if another company wants to buy you out?

If someone approaches you about buying your company, it's in your best interests to talk to your attorney first. You'll want to make sure that everything you do, whether it's rejecting an offer, negotiating or accepting the merger, is done legally. A merger could be a great way for you to walk away from your business or to take on a role in the new business following the merger, depending on your negotiations. Your attorney will help you make sure that your rights and interests are protected if you want to go through with a merger or intend to stop a merger from taking place.

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