{"id":119,"date":"2017-12-11T04:27:53","date_gmt":"2017-12-11T04:27:53","guid":{"rendered":"https:\/\/epiksolution.org\/startup-company\/blog\/?p=119"},"modified":"2020-09-01T06:22:43","modified_gmt":"2020-09-01T06:22:43","slug":"startup-companies-and-mergers-acquisitions","status":"publish","type":"post","link":"https:\/\/www.startupcompanycounsel.com\/blog\/startup-companies-and-mergers-acquisitions\/","title":{"rendered":"Startup Companies and Mergers & Acquisitions"},"content":{"rendered":"

Profitable start-up<\/a> companies, especially those who have angel investors on their board of directors<\/a>, will likely be acquired by another company. \u00a0Angel investors invest in startups with the intention of a merger<\/a> and acquisition<\/a> sale or exit, buying out their initial investment. \u00a0Alternatively, the start-up will grow large enough to acquire another company. \u00a0Larger companies look for smaller companies for value and growth opportunities. \u00a0Mergers and acquisitions (M & A) help companies fill in gaps in their strategies. \u00a0Not every merger & acquisition will be successful. \u00a0As an industry, merger & acquisition moves companies ahead and expands businesses. Start-up Company Counsel has the knowledge and experience to represent start-up companies in merger & acquisition negotiations and put the start-up in the most advantageous position possible in the deal.<\/p>\n

Companies acquire other companies for various reasons. \u00a0Often, a company acquires another to bridge a gap. \u00a0For instance, a software development company would acquire a small \u201cinternet of things\u201d security company to execute a strategy of product innovation. This is known as the target company. \u00a0The acquiring company realizes the benefit of acquiring a profitable company and their intellectual property<\/a>, resources, and talent while entering new market space as a result of of the acquisition. \u00a0The acquired company can use the money to pay off debts such as loans and repay investors. \u00a0Consequently, both sides benefit from the deal and realize great value.<\/p>\n

There are also potential drawbacks to merger and acquisition. \u00a0Most of the deals fall through, with almost 50% of merger & acquisition deals collapsing within 2 to 3 years. \u00a0The employees of the acquired or target company, especially higher level employees, are frequently replaced after a short period of time. \u00a0Deals are structured so that higher level employees of the acquired company will be employed for 24 to 36 months after the acquisition.\u00a0 After that, the acquiring company can extend employee\u2019s contracts, or get rid of them at-will.<\/p>\n

In California, state statutes govern mergers and acquisitions. \u00a0The statute requires companies to follow a very specific procedure before the secretary of state will approve the merger. \u00a0At the outset, the board of directors for each company must approve the merger and the agreements between the companies.\u00a0 The agreement must be in writing. \u00a0The statute obligates the companies to state in writing the entire agreement between the parties, specifically stating all of the terms of the merger. \u00a0The new company shall file amendments to its articles of incorporation<\/a> including the acquisition therein, specifically including the name of the new corporation, if there is one. \u00a0The agreement must also set forth the surviving company and its place of business.<\/p>\n

Furthermore, the disposition of shares and classes of stock must be expressly memorialized in the agreement. \u00a0The agreement must account for how the companies will convert shares of stock and how the parties to the agreement will ascertain the value of the stock.\u00a0 In addition to describing with specificity how the parties will dispose of shares of stock, the agreement must also set forth as to how other properties such as cash, real estate, intellectual property, and any other assets (such as equipment and pensions) are transferred in the deal.\u00a0 The parties may set out any other term they desire in the agreement. \u00a0The parties should set forth the financial obligations of the acquired company, along the with payment terms as well.<\/p>\n

After the parties execute the agreement for the merger, the acquired company no longer exists. \u00a0The surviving company now has all of the rights to the acquired companies\u2019 former property including debts and liabilities. \u00a0Any causes of action against the acquired company that arise before the merger, even if not acted upon, survive the merger and become the surviving companies\u2019 obligation.<\/p>\n

Contact a Silicon Valley Merger & Acquisition Lawyer Today<\/u><\/p>\n

Start-up Company Counsel<\/a> has worked with many companies, negotiating and executing their mergers and acquisitions. \u00a0Whether or not it is the right move for your company, through signing the final agreement, Start-up Company Counsel advises on the best options and will help you achieve your goal with a\u00a0 merger and acquisition. \u00a0Contact them today<\/a> at 855-353-5377 to speak with an experienced merger and acquisition attorney who will zealously represent you and your company.
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