Mergers & acquisitions can be a powerful tool for building assets and creating wealth for black entrepreneurs and business owners. You might have heard the term mergers and acquisitions, or M&A for short, but wondered what does that mean? Perhaps you are familiar, but thought to yourself that it is only an activity that large public companies participate in. Or maybe you have always been curious about how to participate in a business transaction of some sort but did not know how or where to begin. My hope is to demystify commonplace business transactions and provide some insight into how they work, the benefits of such transactions, and how they can help create wealth for the black community. What are Mergers and Acquisitions? M&A refers most commonly to the buying and selling of companies or a company’s assets.
This is the “A” in M&A, or acquisitions. The “M” refers to mergers which are less common in the smaller and middle markets, but occurs when one company combines with another company, creating a single organization. The most common type of business transaction in my experience is when a buyer purchases the assets of another company. This is often the simplest way to conduct a business transaction and is buyer friendly because it allows the buyer to cut off any unwanted liabilities at the closing. The next most common method is when a buyer purchases the stock of the selling company. Here, the buyer takes over the entire company unless something is explicitly excluded from the sale. These are both simplified descriptions to provide an overview, there are several tax and legal reasons why a transaction should be structured as an asset sale, stock sale, or merger. There are also other variations of business transactions that are not within the scope of this article.
Image: MW Legal Group, LLC
28 The Acumen
Powered by FlippingBook