Corporate transactions cover a wide range of activities that can apply during the lifecycle of a business. Here we provide a summary of some of the typical transactions that occur in the corporate sphere.
A merger occurs when two companies amalgamate into one. There are five types of mergers:
In an acquisition, one company absorbs another. Acquisitions can be distinguished into two groups:
When a business is to be sold, there is a choice as to whether to structure the transaction as a share purchase or an asset purchase.
A share purchase means that the buyer will acquire the shares in the company (which will typically be the entirety of the issued share capital). Share purchase is also possible in relation to some of the shares by either existing shareholders or the company itself.
An asset purchase involves the buyer negotiating which assets and rights they will take on. They may, for example, choose to acquire responsibility for certain liabilities but not others.
A management buy-out occurs when a company’s existing managers buy out a significant proportion (or the entirety of) the company. The purpose of this is for the managers to have a greater degree of control and influence on the direction of the company. These can be a useful business solution to allow it to remain controlled by those who already understand how to run it effectively and allows for a smooth transition to the new owners.
A management buy-in works in the same way as a buy-out, except the purchasers are an external management team, from outside of the company. The existing managers will be replaced by those who have purchased the interest in the company.
A leveraged buy-out is the purchase of a company with a significant proportion of debt financing. The target company in this instance will usually not have agreed to the takeover, and their assets can be used as collateral by the acquiring company.
Companies need to ‘raise capital’ in order to fund their operations and investments. There are several ways a company can do this:
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