What is a Corporation Merger?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 16 May 2020
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Also known as a business merger, a corporation merger is the decision of two incorporated entities to reorganize their two separate organizations into a single entity. Mergers of this type usually involve businesses that offer similar or at least complementary products, with an eye toward increasing the amount of market share they jointly hold by combining their resources under one corporate umbrella. As with most merger situations, a corporation merger can take on several forms, and must comply with any governmental regulations that are in force in the country where the merger is recorded and the new corporate entity is incorporated.

Before a corporation merger can commence, the shareholders as well as the governing board of each company involved must agree to the terms of the proposed merger. This often involves the formulation of plans that identify the operating structure for the proposed combined company, as well as identifying the benefits that will be derived from the union. Generally, shareholders must receive some sort of assurance that their shares will convert with ease and will retain their value before granting their assent. Once all parties concerned are in agreement, the actual execution of the merger begins.

Depending on the complexity of the corporation merger, the process may be completed in a short period of time, or may possibly take months or years. For example, if two local retailers who each own one store choose to merge into a single corporation, chances are that the process will require little more than filing merger forms with local and state officials. Depending on the regulations that apply, they may be able to complete the merger with a minimum of cash outlay and without incurring any additional tax burden.

For a corporation merger that is more involved, the process may take an extended period of time. Factors that may require additional time and attention include the fact that two different types of corporations are involved with the merger. For example, one may be a de facto corporation, which is not currently operating in compliance with all applicable regulations, and the other a de jure corporation, which is currently in compliance. Depending on applicable laws, the union of a domestic corporation with a foreign corporation may require additional effort. In preparing for the proposed merger, it is often helpful to obtain the services of an attorney who specializes in mergers and acquisitions. This will make it possible to identify any potential obstacles and address them before a vote is taken and the decision to merge is approved.

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