Mergers and Acquisitions Law

Mergers and Acquisitions

"We've handled the intricacies of mergers and acquisitions law for over 10 years."

- Brian Walsh, Esq.

Mergers and Acquisitions

Help knowing when to buy an entire business, just the assets of a business, merge with a business, or to walk away: all good reasons to consult with a business attorney.

When Mergers Make Sense

There are times when it makes the most sense for two businesses to merge, rather than for one business to buy the other.

For example, let's say that "Company A" has valuable trademarks and patents, but shows a loss for recent years. "Company B" wants the trademarks and patents, and is highly profitable. By merging the two companies, the following benefits are likely:

  • "Company B" gains the trademarks and patents it desires, while offsetting its gains for tax purposes with the loses of "Company A".
  • "Company A" gains the financial strength of "Company B" when it needs it most.
  • No longer competing, both companies are better together than they were alone, poised for greater profits going forward.
Buying a Business Entity

It's usually in the seller's interest for tax purposes to sell the entire business, rather than just its assets. But there are times when it makes the most sense, even for the buyer, to buy the entire business entity.

For example, a business may have many valuable contracts. It may be easier to buy the entire business than to renegotiate all the contracts.

Or, the business could be owed a lot of money. Collecting on any outstanding invoices may only be possible if the business itself is purchased.

Also, the business could have an intangible asset that is highly valued, such as goodwill in the community - something impossible to sell separately from the whole kit and kaboodle.

Acquiring Business Assets

Often, the sharpest course of action isn't to buy the business. Instead, it's to buy the business' assets.

When buying an entire business entity, one is buying just that: all the business. This may include any unpaid taxes, business debts, and any pending legal matters, such as that employee who was wrongfully terminated three months ago, and who will soon file a lawsuit - after the sale of the business has concluded.

Instead, sometimes buying just the desired asset or assets makes sense. For example, it may be only the name of the business that has value, or, just one restaurant location, but not the others.

Using this method, a buyer can cherry pick just the desired assets, and avoid everything else.

Schedule an Appointment with our Firm

For help with any type of merger, acquisition, or business purchase, click below to schedule a meeting. We keep all info strictly confidential, and we answer all inquiries in a timely manner.


Tax-Saving Strategies

Many expenses relating to purchasing a business can be written off tax-wise, but it takes knowledge and planning - before the sale takes place - to truly take advantage of all possible tax benefits.

After a sale, it may be too late, for example, to categorize assets. This is important because the seller's interests will differ from the buyer's when it comes to taxes. For example, the seller will surely want as much of the business sale price as possible allocated to assets which can be taxed at the more favorable "long-term capital gain rate" of usually 15%. Otherwise, the money the seller is receiving for such assets are in jeopardy of being taxed as ordinary income, which can be as high as 39%.

But the seller and the buyer both can't have it their way. One of them is going to have to take the tax hit of a less favorable categorization of assets. As such, the cost of the business is often adjusted accordingly.

How a Business Lawyer Can Help

Here are just a few ways in which a business lawyer can help during a business acquisition:

  • Helping weigh the pros and cons of buying the entire business or just its desired assets,
  • Assisting the buyer in the formation of an entity under which to buy the business,
  • Negotiating terms of the sale,
  • Helping to determine if the seller’s lease and other contracts can be easily transferred,
  • Drafting a sales agreement,
  • Drafting a document handling the assignment of the seller’s intellectual property rights,
  • Creating a "closing checklist" and preparing paperwork necessary for a smooth closing.