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More Than 15 Years of Experience
Practice areas
Merges And Acquisitions
Merges & Acquisitions (M&A)
The method of "mergers and acquisitions" has become popular in recent years, due to which more companies have begun to expand and increase their volumes of operations. The reason for resorting to such transactions can be both the growth of the company and attempts to save part of the business. In what cases can mergers and acquisitions be useful and what purpose do companies pursue when resorting to this method?
In recent years, more and more companies have turned to the method of "mergers and acquisitions", which has led to the growth and optimization of part of their business. The term "mergers and acquisitions" refers to a number of civil and corporate processes, the purpose of which is to combine one company with another or several companies into one.
What are M&A transactions?
Mergers and acquisitions are options for business reorganization. The legislation of the Republic of Azerbaijan identifies forms of reorganization of a legal entity in the form of merger, accession, division, separation and transformation. In foreign financial and economic literature, such transactions are called Merges and Acquisitions, abbreviated as M&A.
How are mergers and acquisitions of companies carried out and for what purpose do companies do them?
The term M&A refers to merger and acquisition transactions of companies. These are options for reorganizing a business.
When merging, two enterprises are combined into one. At the same time, companies can either completely lose their independence, in which case they form a completely new organization, or simply combine assets. In the second case, the primary companies do not cease to exist.
In a takeover, one organization buys a certain share in the authorized capital of another. Most often, a takeover is transformed into a merger.
Our legislation also provides for a merger option, in which all the enterprises being taken over direct all their resources to the development of the new company.
Purpose of a merger
A corporation created as a result of a merger acquires the rights and obligations that previously existed in the organizations participating in this procedure. Mergers are often used as an alternative to liquidating a legal entity.
But still, for the most part, M&A transactions are used for the purpose of promoting business, since with the correct organization of a merger, new enterprises with consolidated assets appear on the business market. In addition, the shares of the company's founders are redistributed.
As a result of mergers and acquisitions, companies manage to:
1. Increase the assets of the merging organizations;
2. Become more competitive and outperform competitors;
3. Reduce costs, thus contributing to savings.
Thus, the main goal of mergers and acquisitions of enterprises is the ability to improve financial performance and reduce costs and risks.
It should also be noted that in some cases the purpose of mergers and acquisitions may be, for example, the opportunity to take tax advantages. For example, one of the companies has large amounts of taxable income, while the other has accumulated large tax losses carried forward to future periods. By merging with a company with tax losses, the acquirer can use them to reduce its tax liabilities.
One of the many stages of the merger process is the assessment of legal risks. Our company can provide you with a conclusion based on the results of the legal risk assessment. It specifies the material risks in excess of the specified amount and ways to resolve potential problems. The conclusion contains:
a detailed analysis of the structure of the target enterprise;
its operating procedure;
identified defects in corporate governance;
data on corporate property, etc.
Our services also include:
• Structuring M&A transactions under Azerbaijani law
• Formalizing shareholders’ arrangements in Azerbaijan by drafting and negotiating shareholder agreements and other execution documents
• Drafting and negotiating share purchase agreements
• Advising on joint ventures and strategic partnerships that best meet clients’ business objectives
• Conducting full legal due diligence
• Completing risk evaluation plans and supporting deal closure
• Providing antitrust, tax, financing and other regulatory advice in respect of clients’ transactions
It is important to remember that when organizing merger or acquisition transactions, it is necessary to take into account a set of legal risks. Only correct calculations and a deep analysis of profitability will allow you to benefit from the M&A procedure - business development, growth in turnover, and increased profits. If you make a deal thoughtlessly and hastily, the acquired company can become a source of problems and costs.
