In line with our tradition, and because most good things come in three’s, here are the 3 things you need to bear in mind during the process of a merger or an acquisition:

1. Distinction between the two

• Simply described, Mergers and Acquisitions (“M&A”) are transactions in which the ownership of companies, businesses or their operating units are transferred or combined. This is typically an aspect of strategic management and M&As allow companies to grow, reduce in size and change the nature of the business or improve their competition position.
• In simpler terms therefore, a merger is a legal consolidation of entities, while an acquisition involves one entity taking ownership of another entity’s stock, equity interests or assets, an acquisition or takeover being the purchase of one entity by another. Such a purchase maybe 100% of the assets or ownership equity of the entity.
• Commercially speaking, both M&As result in consolidation of assets and liabilities under one entity. Mergers and acquisitions can have a significant effect on a company’s profits and net assets.  The financial reporting aspects of M&A are therefore important in affecting share values, hence an experienced financial advisors must be instructed as part of the Transaction Advisors Team for the M&A deal in question.

2. The applicable legislation

This is largely dependent on the type of industry the M & A deal will be taking place in. For instance, if a bank is involved, the Banking Act will apply, if a Cooperative Society is involved, the Cooperatives Societies Act will apply. If a company is involved, then the Companies Act, 2015 will apply as well. Some of the key legislations to look at also include the Transfer of Business Act, the Capital Markets (Take-Overs and Mergers) Regulations 2002 and the Competition Act, No 12 of 2010. Create the time to go through the applicable laws in your specific circumstance. Alternatively, simply consult a corporate or commercial lawyer to guide you through the process and to help you understand the provisions better.

3. Structuring the deal.

Like any other deal, the process in an M & A transaction generally involves the Negotiations, Offer, Acceptance, and the things you look out for are largely dependent on which side of the dealing parties you are representing.  As usual, there’s also the Risk Assessment and Legal Due Diligence process, determining the Dominance of undertaking and obtaining the required approvals, the aspect of preparing documentation, completion and hand over and opinion issuance.

How Legal Answers Consulting can assist:

LAC can support businesses and start-ups in Africa by advising on the legal risk assessment and management during an M & A deal for your business. We will also advise you on the process and prepare the entire suite of required M & A documentation for your business. Please do not hesitate to reach out by e-mail to legal@legalconsulting.pro or to your usual contact at Legal Answers Consulting for any further questions you may have.