Mergers and acquisitions are the legal incorporations of companies into their own economies that are smaller than them or that contribute a large market share. Both mergers and acquisitions may undergo various differences within themselves. Istanbul Lawyer Firm's Turkish business lawyers create the conditions for their clients to carry out this process successfully.
The situation taken as a basis in mergers is to harmonise the management structure of the other company that has been acquired or merged with the management form of the owned company. For this reason, the contracts prepared are important. In addition to this situation, it is necessary to do economic planning in such a way that conflicts of interest in companies are prevented.
Unlike general company capital, cash is not required for mergers and acquisitions processes. When a company is acquired, there is no talk of a tertiary merger. The acquiring company carries out its general management, and the acquired company cannot maintain its autonomy.
Types of Mergers and Acquisitions
Different companies can be created by purchasing or merging companies. The new companies created are made with the purpose of economic growth, preventing competition, or a more stable growing company economy. The types of mergers that usually result in only one of the companies increasing its market share are:
- Horizontal Mergers
- Vertical Mergers
- Conglomerate Mergers
Horizontal Mergers
A horizontal merger is realized with the aim of the two companies growing together economically. Therefore, this kind of merger situation occurs between companies in the same sector. Thanks to this merger, while competition among companies decreases, more capital can be allocated economically for competition with other companies or on a global scale. In addition, increases are observed in the number of products sold or supplied.
Vertical Mergers
Companies in the same sector again carry out a vertical merger, but unlike the horizontal merger type, it is not done to gain more power in market share. In general, it is a type of merger that allows a company to access various products it needs more easily. Thanks to this merger, another company that buys a small or early-production company performs a merger instead of a business partnership. Thanks to this merger, it can become dominant in many issues, from the purchase of products to their prices.
Conglomerate Mergers
The simultaneous acquisition of several companies carries out a conglomerate merger. In this way, the masses of customers of companies that produce different products in similar sectors are united, resulting in a new company system with a larger economy. The purchasing company carries out the management dominance of this system.
How Mergers are Structured?
When performing a configuration on mergers and acquisitions, a stock purchase asset purchase is made. The requirements for both methods of purchase differ from each other. The viability of the companies' economies may not be maintained while the mergers are being structured. In other words, one of the companies can dominate the other financially.
When making a stock purchase, payment can also be paid in shares or cash. This situation reveals the difference between mergers and acquisitions in terms of merger and acquisition principles. Although the acquisition of the other company is out of the question, one of the companies has a say in the entire total economy. Legally, the acquirer has more rights. There is also a tax liability.
In the form of asset purchase, the parent company has a say in the types of assets owned by the other company. Thanks to this, the purchase of compensation can be carried out and subject to taxation. In such mergers and acquisitions, companies can use the names of their brands without changing them.
How Acquisitions are Financed?
The situation that finances mergers and acquisitions is the benefits that the acquisition in question brings. Cost reductions, competitive advantages, and, of course, taxation advantages can be obtained. In cases where one company buys another, there is an increase in economic growth. A wider range of product sales or supply occurs, resulting in economic financing.
Mergers and Acquisitions According to Turkish Law
There are regulations on mergers and acquisitions within the limits of the Turkish Constitution. The regulations in question include the compensations that companies receive from each other and the methods of obtaining compensation. In stock purchases, unanimity is essential when the acquired company claims compensation. However, consensus is not sought in asset purchases. The issue of taxation, on the other hand, also carries moisture in mergers and acquisitions, because there may be changes in the total tax paid by companies.
When you need a mergers and acquisitions law firm, you can have more information about Turkish business laws by choosing our firm. We assist in forming necessary contracts for companies' mergers or acquiring one company by another. While providing consultancy services for Turkish and foreign persons, we ensure that the legal assistance you need is provided best.
You can read our previous article at /blog/tort-law-in-turkey-definition-and-conditions