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MERGERS VS. ACQUISITIONS In general, CPA/Valuators use the same method to calculate a standalone value and customer value for an acquisition and merged. In the event of a merger, the parties negotiate how the relative value affects the amount of ownership each party will have in the new company. However, in the event of an acquisition, the parties negotiate how the relative value that contributed to the new entity will turn into a purchase price. Conditions are an essential factor in the acquisition: the seller will probably want to structure the acquisition for cash in advance, and the buyer will generally prefer to pay for the acquisition over time. These conflicting structures reflect each party`s fiscal objectives; the seller wants a sale that gives him a capital gain, the buyer wants a short-term amortization or a deduction of fees. Hamilton notes that in both cases, the parties must anticipate and support how performance will be changed after the agreement. The main drawback of buying shares is that the purchaser may assume actual and potential liabilities that may result in significant unintended unintended legal exposure. Detailed due diligence is essential in this matter and compensation from selling shareholders may be required. Another potential problem is that dissenting shareholders may prevent the buyer from taking control of all outstanding shares of the target entity. Benefits: To enter into a merger, you usually need less than all shareholders to give their consent (the actual requirements depend on state laws and contracts signed by you). If your company has many different shareholders, small or dispersed, it may be useful to pursue a merger to make selling your business easier and lighter. Benefits: From the buyer`s point of view, this may be a favorable structure, as it allows the buyer to choose only the assets he wants or considers valuable, while unwanted assets (and liabilities, known and unknown) are left behind without having to deal directly with the shareholders of your company.
It can also give significant tax advantages to the buyer related to an asset purchase (the buyer gets a "step in the base" with respect to the assets he buys). The seller`s objective for the total product can only be achieved by retaining certain assets that can be leased to the buyer or sold to third parties. The oil and gas industry does not distinguish between an asset and the purchase of shares when it designates its corresponding sales contract. In this sector, whether it is the purchase of assets or shares, the final agreement is called the Purchase and Sale Contract (PSA). One of the considerations for the buyer is that he does not get 100% control unless all shareholders agree to the sale of their shares.