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Princeton Corporate Solutions
Princeton Corporate Solutions
Princeton Corporate Solutions
Princeton Corporate Solutions
Princeton Corporate Solutions
Princeton Corporate Solutions
Princeton Corporate Solutions
Princeton Corporate Solutions
Princeton Corporate Solutions
Princeton Corporate Solutions
Princeton Corporate Solutions
Princeton Corporate Solutions
Princeton Corporate Solutions
Princeton Corporate Solutions
Princeton Corporate Solutions
Princeton Corporate Solutions
Princeton Corporate Solutions
Princeton Corporate Solutions
Princeton Corporate Solutions
Princeton Corporate Solutions
Princeton Corporate Solutions
Princeton Corporate Solutions
Princeton Corporate Solutions
Princeton Corporate Solutions
Princeton Corporate Solutions
Princeton Corporate Solutions
Princeton Corporate Solutions
Princeton Corporate Solutions
Princeton Corporate Solutions
Princeton Corporate Solutions
Princeton Corporate Solutions
Princeton Corporate Solutions
Princeton Corporate Solutions
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Princeton Corporate Solutions

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  • 1. 1. How to Identify M and Targets a. How to find M and A TargetsA business valuation is needed in order to get the right target firm for Merging and acquisition.The very first step before doing anything else is calculating the market value of the targetcompany under assessment. You will also be required to find an estimated future value of thecompany in addition to the current value. That is the easiest way for you to understand if a firmis worth merging and acquiring. You will have to spend a considerable amount of time instudying the business history of the target company. Check on the products produced by thefirm, its capital requirement, the value of its brands as well as the organizational structure. Allthe aspects of the company must be reviewed with strictness. b. How to negotiate the best dealIt has been argued by Financial Directions Inc (2009) that, an organization must put intoconsideration a number of factors before entering into a merger or acquisition. They haveidentified three issues as shown below: Pre-Acquisition Issues Post-Acquisition Issues and Administrative IssuesIn the pre-acquisition issues you must evaluate the organization to be purchased by practicingdue diligence. This is a step which takes place long before the letter of intent or the purchaseagreements are duly signed. At this stage, the purchasing company is required to point out theknown liabilities and the potential ones. It is well to identify all the issues that need to be sortedout before the purchase takes place.The strategies elaborated in this manual are very useful for guiding the Board of Directors innegotiating during the acquisition transaction. If the strategies are followed closely, you will bein a position to get the best deal for your shareholders.It has been argued by (FinancialDirections Inc. 2009 andKuenyehia 2010), the following strategies are very essential in propermerger and acquisition negotiation.Establishment of a special Negotiation Committee1|Page
  • 2. This is the first strategy to be adopted by a firm that is faced with a merger and acquisitiontransaction. Such committee should be made up of members who are very experienced in thematters of acquisition and mergers and above all they should be the disinterested members. Itwill be a prudent idea to include leading professionals from compensation, benefits and payrollas well as experts from other disciplines that the merger and acquisition deal may touch on.That means you must include legal and management experts to handle the affairs. All thesemust be disinterested parties to avoid conflict of interest. The negotiators will be responsiblefor arriving at the price and getting the best acquisition proposal from the interested parties.Always remember that the negotiation process is just a means to an end and not an end minitself. The committee members will easily succeed if they set out their important goals rightfrom the start. The committee must work towards getting the best deal for the company’sshareholders. So basically, the firm’s objectives will easily be achieved when the committeeunderstands the core values and sticks to those values throughout the negotiation process.They should know exactly when to stop or stretch on the key issues regarding futureinvestments, price and integration.Engage the most Competent AdvisorsThis is the strategy number two when it comes to a point where you have important and highlysensitive matters. Your firm must employ people with great skills in areas of tax, sale processdesign and implementation, legal, due-diligence, valuation of the company, financialevaluation, compensation and regulatory arrangements. When you use competent advisors,you will have you will run an informed and transparent merger and acquisition exercise.Avoiding Conflict of InterestThis is a very important aspect of the committee. All members of the special committee shouldnot whatsoever have any conflict of interest when it comes to matters at hand. All peopleworking on the merger and acquisition must be questioned to that effect. A quick considerationmust be made incase any conflict of interest is cited. The aim of your company is to eliminateany form of bias that is caused by conflicted interest if any.An independent committee makes it possible for your firm to base their arguments oncorporate advantages instead of some external influences and considerations from politiciansand other people.Determination of price via thorough reviewAll good deals and best prices are arrived at through carrying out proper reviews. This is theprocess that finds out whether the price offered is the right one. At this stage, the committeeemploys the services of investment bankers, advisors and legal experts to arrive at the rightprice.2|Page
  • 3. There are many activities to be carried out at this stage including: A detailed review of current as well as historical financial results of the company. Scrutinize the financial forecasts that relates to the business, assets, cash flows, prospects and liabilities of the company, Carry out discussions with the top management of the firm on the future prospects of the company Check on the share market prices and make a comparison with other shares traded on the same bourse. Take a look at the company projection for the next two years or so. Review the company’s business plans Take a look at the market or better still, the replacement value of the company assets. Analyze whether a better price may be obtained in the future or now Find out the impact of suppliers, managers and customers among other people who are related to the company Are there any regulatory or legal issues raised by the transactionsThe committee should be outright in rejecting the offer in case they find out that the price isquite inadequate or if the time is wrongly done.Use the Closed Auction StrategyThis is a great strategy to be followed by any company that needs to get the best deal. All thepeople interested in the shares of the company are required to acquire the shares and make asealed bid before a certain deadline is reached. The committee is responsible for putting amemorandum of a descriptive nature to the prospective bidders.Long before the bidding process starts, the special committee will be required to all prospectivebidders the draft contract. This will allow the bidders enough time in carrying out due diligenceand then submit their bids together with any comments on the draft that they consider useful.In the case of a closed auction there are more than one round and more than one bidder.It is better to go for a closed auction because it is largely effective even in cases where there isonly a singer bidder. The bidders are not in a position to know whether there are otherinterested bidders. Therefore, the best bid is always put forward. In case of a closed auction,the committee has a mandate to negotiate with bidders to have them put forward higher bids.Keep Proper Records and apply the Front Page TestThis is the 6th strategy that requires you to keep clear records as well as practice the ‘frontpage’ test. The committee is therefore in a position to carry out their mandate well. Inwhatever the committee does, it must remember that all its actions can be challenged in acourt of law.3|Page
  • 4. All the minutes of the Committee should as a result be kept as the core records of their regularmeetings. These minutes should record what has been done and how it was done. Whatever isdiscussed during the meeting must be expressed with clarity in the minutes. All the oral andwritten material used during presentation should be stored well alongside the advice andrecommendations from experts.The appointed advisors will be required to play a key role in preparing the legal, financial aswell as other presentations for the committee. This is necessary to help the members in makingwell informed decisions. The committee must be reminded to keep great records of theirproceedings because they can serve as a great memory booster during the time of litigation. Itwill also be an evidence of due care. The materials must always be compiled for every meetingand be available in written format of all issues that were deliberated on during their meetings.You must understand that the Committee will be faced with many decisions as well as pressurefrom litigants, trade unions and even politicians. That is why the committee is advised to applythe ‘front page’ test. In this case they will be required to think on what will happen in case theirdecisions are reported on the front pages of respectable newspaper or financial journals suchas the Wall Street Journal and The Financial Times. The idea of adopting this strategy is to makesure that the committee’s decisions are perceived reasonably by the people and then how thedecisions will be explained and the accompanying effect.The Committee must be Vigilant and FocusedThe must learn to stay focused at all times in their dealings. The committee members mustalways remember that there is no transaction until the deal is closed and in some special cases,it goes beyond that level. New issues will always appear even after signing the deal. Theseissues are known to have a negative impact on some aspect of the deal. In some cases the dealmay be in danger of collapsing. Therefore, it is important to be vigilant and have the energy tomove on in order to improve on the probability of closing the deal. c. How to analyze synergy between the target company and your company(TOWERS PERRIN, 2008) It is very important to analyze the synergies between the targetcompany and the purchasing company. Check out whether the assumptions regarding cost andrevenue synergies are in order. Investigate the liabilities which are expected from thecombination and focus on such aspects as golden handcuffs, customer overlap and pensionplans among other things. Find out if there are any major integration costs such as those in ITsystems and other shared integration services.It is argued by Evans (2010) that understanding the synergies of a merger or acquisition, it willincrease the prospects of a merger succeeding. In a merger there is an underlying principle thatstates that 2+2=5. That means that if company A is valued at $2 billion and company B is valuedat $2 billion, merging the two companies will lead to a new company valued at $5 billion dollar.4|Page
  • 5. That means that merging two companies creates additional value which is called synergy. Evans(2000) further argues that there are three forms of synergies. Cost of Capital: When two companies combine in a merger of acquisition, they face lower cost of capital. Revenues: Merging of two companies will lead to realization of greater revenues than when the two companies operate separately. Expenses: Lower expenses are experienced when two companies merge than when the two companies are operating independently. The largest source of synergy for two merging companies is the lower expenses. That is why many mergers are inspired by the possibility of getting highly reduced operation expenses. The reduced expenses are as a result of the elimination of redundant services between the two firms. There are other strategic reasons why people engage in mergers. Gap filing is one of the strategic reasons that you can explore before you enter into a merger agreement. To illustrate the importance of Gap filling in a merger an example will be in order. In case one company has some weakness such as poor distribution, it can merger with another company with strength in distribution. The resultant company after the merger will be more powerful. This merger will lead to long-term survival in the market place. The second strategic reason for entering into a merger is that of positioning. Strategic positioning is necessary in order to be in a better position in harnessing future opportunities. Example, a broad band service company can be merged into a telecommunication company. This arrangement improves the company’s position for future business. Broader Market Access When a company acquires a foreign company, it gets a faster access to new markets. It may also be cheaper to acquire another company than investing internally. As an illustration, suppose a company wants to expand into fabrication business and there is another company with idle facilities. It will be rational and cheaper to acquire that company than starting to build new facilities. The idea of diversification makes it possible if a company needs to smooth-out its earning. After a merger with another company in a different industry, the company aims at becoming more profitable and ensuring consistence in growth. This is very suitable for those corporations operating in mature industries where there is no hope of future growth. A merger or acquisition can lead to short-term growth in profitability. Therefore, a merger boosts poor economic performance.5|Page
  • 6. Undervalued Investments When analyzing the synergies between two companies, focus on the target companies which are undervalued. This will make a good investment for the purchasing company. d. Why being a publicly traded company makes it easier to facilitate M and AIn order to form a corporation after a merger, there are various documents which are requiredsuch as the Articles of Incorporation. This document requires that the applicant indicates thenumber of shares that the new corporation is allowed to offer. They secretary of state furtherdirects that the applicant cannot indicate zero here. Therefore, it becomes easier for a publiclytraded corporation to facilitate a Merger.It is argued by Evans (2000) that the publicly traded companiesare easier to deal with becausethe private corporations are full of excesses which make it harder for valuation to take to beaccurate. The following are some examples of those excesses by private companies: Excessive bonuses, travel and perks. Unnecessary motor vehicles as well as other assets. Consultants who provide unnecessary services because they have strong ties to company management. Cases of high salaries. Payroll containing family members who are not offering any useful service to the company.The purchasing company should have a sole objective of getting the real profits and values thatwill be reflected after the merger.2. Documentation: a. As well as the legal documentation it is important to verify operating documentation to ensure that new staff can run the business if necessary. b. Items to check: i. Articles of incorporationIn order to form a professional, stock or close corporation in some states such as California, youmust file the Articles of Corporation with the Secretary of State. You can make use of FormARTS-GS in case you are forming a general stock company as a result of a merger. In order toform a close corporation, then, form ARTS-CL is more appropriate. There are some corporationsthat can opt to draft their own Articles of Incorporation. That is also allowed. The Californiasecretary of state argues that these forms meet the minimum statutory requirements but6|Page
  • 7. despite that, you must seek legal advice from a private attorney about the specific needs of amerger or acquisition and if there are any additional provisions which are applicable.In the state of California, to form a stock corporation through a merger, the proposed namemust contain the word “corporation” “limited” or “incorporated” or an abbreviation of any ofthe three words.In case you are forming a professional corporation only, there are some name-stylerequirements that must be met. This depends on the laws governing a particular professionunder which the proposed corporation will be working. To get the specific requirements, youwill be required to contact the relevant state board or agency that controls the profession inwhich you are interested.In a case where you compose your own Articles of Incorporation, then, make sure that youinclude the name of the corporation in the title of the document. The name must be writtenexactly as it appears in the articles. Failure to do that, the Articles of Incorporation will bereturned to you without filling them. It is advisable to avoid conflicts by excluding the name ofthe corporation from the title of the document.The corporate purpose should be included in the Articles of Corporation unaltered in anymanner.Service of ProcessThe proposed corporation after a merger is required to list the name of the agent for service ofprocess. The agent can be a person or a corporation. In case it is a person, you will also berequired to supply the street address of the agent in California. That means, the agent must bea resident of California. A corporation which is active in California and has filed a certificate asrequired by section 1505 can act as your agent for service of process. The agent will beresponsible for accepting service of process in case the proposed corporation is sued. Theproposed corporation must seek consent from the agent prior to listing the name. Acorporation can never act as its own agent of service of process. Remember it is only one agentwho can be listed.Under the Articles of Incorporation, you will be required to list the Corporate Addresses. Theproposed corporation after a merger is supposed to list the street address of the merger andnot its postal address. There is an item that requires you to list the number of shares that thecorporation is allowed to issue to the public. You can never be allowed to list Zero in this item.Finally, remember that the Articles of Corporation must be signed by each incorporator.Within a period of 90 days after filing the Articles of Incorporation, you will be required to file aStatement of Information.Articles of Incorporation for Nonprofit Corporations7|Page
  • 8. The non profit corporations are those which are organized for educational, religious,recreational, social and charitable reasons. There are incidences where it becomes necessaryfor two such organizations to merge into one formidable corporation in order to improve onefficiency as well as service delivery. There are several nonprofit religious organizations whichare organized to operate a church or carry out other religious duties. This is called nonprofitReligious Corporation.The second category of organizations is those organized to carry out charitable duties. Thesecorporations usually obtain tax exemptions in many states. To form such corporations, in moststates, you will be required to file the Articles of Incorporation in accordance with state laws.Fees for Filing the Articles if IncorporationThe fees for filing the certificate of incorporation vary from state to state. In California, it is$100. ii. Articles of association iii. BylawsCalifornia Secretary of State (2013). An acquisition or a merger is a combination of twocorporations in which case one of the corporations is fully absorbed by another corporation.The target company losses its corporate identity while the purchasing company retains itsidentity. Therefore, a merger extinguishes the merged corporation while the survivingcorporation assumes all the rights, liabilities and privileges of the merged corporation. Notethat there is a difference between a merger and a consolidation. In the latter, two corporationsare required to lose their separate identities and form a wholly new corporation.The Federal as well as state laws is used in the regulations of mergers and acquisitions. Thisregulation is necessary because of the concerns raised that mergers can lead to completeelimination of competition between the merging firms. Such concerns are more serious in acase where the firms that are proposing a merger are strong rivals. The federal and state courtsmake a presumption that such business arrangements are likely to put restrictions on outputand lead to increased prices in the market. Therefore, there is a feeling that mergers andacquisitions are known to play a role in reducing competition. That is the main reason why thegovernment participates in scrutinizing any proposed mergers.The California Secretary of State (2013) further argues that the US federal government and itsstates have lessened reduced their firm regulations on corporations that are planning to merge.Therefore, those firms are now free to sell or buy complete corporations or parts of those8|Page
  • 9. corporations. This is because the Mergers and acquisitions lead to plenty of benefits such asgetting better management for the newly formed corporation and also making a proper use ofthe underused assets in either of the two participating corporations. There is also the aspect ofeconomies of scale, improved quality as well as increased outputs. The entrepreneurs areencouraged to form new firms because they know that those firms can be acquired throughmergers and acquisitions at higher prices. That means the mergers are posing few risks tocompetition.Despite those developments, there is an antitrust merger law that seeks to prevent thosetransactions which prevent competition among the participating firms. The state gets involvedin all mergers as earlier as at the time when the merger is first proposed. The courts and otherenforcement agencies play a crucial role in forecasting the future market trends as well as anyanticipated effects of a proposed merger or acquisition.Merger ProceduresThe Secretary of state is mandated to set out the corporate merger procedures in a state. Theseprocedures are contained in the bylaws of that state. In a general case, the board of directorsfrom both sides isrequired to pass a resolution that adopts a plan of merger at the initial stagesof the merger process.Such a resolution must clearly the names of corporations that are partyto the merger or acquisition and the proposed name of the newly merged corporation. Thenthe method of converting the shares of the two participating corporations must also be clarifiedat this point. The resolution will also state the legal provision to which the corporations agree.Then the bylaws require that each corporation will have to notify all its shareholders about aplanned meeting during which the shareholders will be required to approve or disapprove themerger. In case the majority of shareholders approve the plan, the directors will be required tosign the merger papers and file them with the secretary of state. In return, the secretary ofstate will issue a certificate that will authorize the operations of the new corporation.A number of state bylaws allow the involved directors to abandon the plans to merger at anytime before signing the final papers. There are also some states with liberal laws that do notrequire the surviving company to submit its plans to shareholders for approval when absorbinganother company. The approval is necessary in cases where the certificate of incorporationdemands such approval.If the merger is formed by firms from two different states, the involved corporations must obeyall the bylaws in their respective states for the merger to attain a high level of effectiveness.There are some states which require that the shares of shareholders who vote against theapproval of the merger should be bought by the corporation.There are some enforcement-policy statements that guide the states in analyzing mergers andacquisitions. These guidelines are issued by the U.S. Department of Justice. (1992) suchguidelines are also used by the antitrust enforcement agencies to analyze the proposed mergertransactions. The Department of Justice (1992) further argues that the horizontal mergers and9|Page
  • 10. acquisitions are very beneficial to the consumers. There are a few questions which are asked inthe process of analyzing a merger in order to identify any dangers that it may pose. The agencywill try to find out whether the merger will produce a concentrated market or whether themerger will lead to adverse competitive effects? Will the merger help in preventing theanticompetitive effects? Will the assets of a failing party leave the market is the merger fails tooccur? The guidelines are used to find out what will happen to the supply of products orservices in an event where the prices increase due to the merger.Mergers in the Telecommunications IndustrySince the start of 1980s, there have been more horizontal mergers than ever before due tofavorable changes in federal laws. This ways followed by the revocation of the antitrust laws invarious states to allow mergers and acquisitions. The most common mergers in the UnitedStates of America have been in the Telecommunication industry.The by-laws affecting the formation of mergers or acquisition vary from state to state in the US.These by-laws touch on many aspects of a merger or acquisition. They offer requirementswhich are based on the number of corporations that are expected to merge, the issues offoreign corporations and whether they are allowed to merger with corporations from aparticular state. It is not possible to cover all the by-laws of each and every state in the UnitedStates of America. We will review the state of California on the matters concerning mergers oracquisitions so as to give you a hint on what you are supposed to do in reviewing the by-laws. InCalifornia, there are code sections that govern the drafting of documents to be used in thecomplex merger transactions. It is a good idea to seek legal advice from a private legal counsel.This expert on corporate matters will provide a solution for you on issues affecting mergingentities.The law requires that, all merger documents must have the corporate name as it appears onthe records of the Secretary of State. That means, even the punctuations and corporate endingmust be identical. It is recommended that you always check the status of the corporation/s thatwill be merged. This is necessary because the state does not allow the filling of mergerdocuments on behalf of a forfeited corporation.Short Form MergerThe California Corporations Code has a section 1110 that makes it possible for the subsidiarycorporation to merger with the parent using a procedure that is highly simplified. The onlycondition is that the parent company must own 100 per cent shares of the subsidiary. Themerger will be completed by just filing a certificate of Ownership with the Secretary of State. Inthis situation, more than two corporations can be merged by making use of a single Certificateof Ownership. The only requirement is that some appropriate statements have to be added inthat certificate.10 | P a g e
  • 11. On matters concerning the foreign corporations, either one or more of the subsidiaries o theparent company can be foreign corporations. Even if the parent corporation is foreign owned,the merger will be allowed to take place if any of the subsidiary is a California Corporation. TheCalifornia Corporations Code section 1110 makes it possible for a parent corporation to beacquired by a subsidiary corporation. All the legislations guiding the merger are provided in theCalifornia Corporation Code Section 1110. The state also further allows a merger in a casewhere the parent corporation owns less than 100 per cent. Despite that, the minimum must be90% of the outstanding shares in every class. In addition to that, there are other complexstatutory requirements. The filings done in this case are actually fewer than those made underthe 100% owned mergers.Merger by Agreement of MergerThe California Secretary of State (2013) argues that, in a case where a California corporation is asurvivor, the state bylaws requires that a copy of the Agreement of Merger must be filedalongside a separate officer’s certificate for every one of the merging corporation and for thesurviving corporation. More information can be found in California Corporations Code sections173, 1101 and finally 1103. All the documents are required to be stapled together including theAgreement of Merger on the top followed by the separate officer’s certificates for eachmerging corporation and the survivor corporation.You will be required to state the basis that you will use to convert the shares of thecorporations which are merging in terms of each other. The Californian bylaws (2013) statethat: “On the effective date of the merger, each outstanding share of common stock of the merging corporation shall be converted into one share of common stock of the Surviving Corporation.”Triangular MergerThere are many cases where a corporate acquisition by merger, a transaction is structured as amerger which is acquired into a subsidiary of the acquiring corporation. This is the case of atriangular merger and it is legal under the bylaws of the state of California. The opposite of atriangular merger is that of the reverse triangular merger in which the subsidiary is merged intothe corporation under acquisition.There are two important agreements which are: “Agreement of Reorganization” and“Agreement of Merger”. The Agreement of Reorganization shows the complete agreements ofthe parties. The agreement of merger is more important since it is a statutory agreement whichis drafted, executed and finally filed with the secretary of State as required by sections 1101and 1103 of the California Corporations Code. The Agreement of Merger is shorter than theAgreement of Reorganization and it is the one that is filed with the Secretary of State.11 | P a g e
  • 12. Filing Procedures In Relation to Mergers between Domestic and Foreign CorporationsIn a case where at least one California Corporation is one of the parties to a merger, then, thereare three ways on which you can complete the filing for a merger in the state of California.These are the regulations according to the California Corporations Code section 1108 (d). a) Submission of the merger documents to meet the California law requirements. This includes the officer’s certificates for the surviving foreign corporation and a copy of the agreement of merger as well as a certificate of Ownership. b) Submission of a copy that has been certified and filed in a foreign jurisdiction. Note that this certificate must be prepared by the public official who has the custody of the original document that was filed. c) Submission of the counterpart of the executed document that has been filed in a foreign jurisdiction. Whoever is carrying out the submission has to provide a proof that the document has been filed in a foreign jurisdiction.In a case where all parties are foreign corporations, you will be required to file a Certificate ofSurrender of Rights to Transact Intrastate Business. This filing is done on behalf of the twodisappearing foreign corporation which are qualified. This is recorded in California CorporationsCode section 2112. There are no charges for filing the Certificate of Surrender of Rights toTransact Intrastate Business.There are cases where the survivor corporation in a merger is a foreign corporation then, themerger filing is made in compliance with the laws of the foreign jurisdiction. Despite that, themerger proceedings have to be approved by the shareholders as well as the dissenters’ rights ofthe disappearing California corporations. For detailed information, you can read the Californiacorporations code sections 1200 et seq. and 1300 et seq. If a surviving corporation in a mergeris a foreign firm, the merger will be considered effective in the foreign jurisdiction. The onlyrequired is that merger filing has to be done in California.Nonprofit CorporationsIn California, there are by-laws governing the merger of non-profit organizations. The CaliforniaCorporations Code sections 6010 et seq. clearly explains the public benefit corporations. Themutual benefit corporations are contained in sections 8020 et seq. All the religious corporationsare discussed under section 9640. The California Secretary of state (2013) argues that in orderto get abetter understanding of the consumer cooperative corporations you will be required toread these sections of the code. In order to have a merger that involves the nonprofitcorporation, the officers’ certificates and an agreement of Merger specifically for the survivingorganization as well as the documents for each of the disappearing organizations.In a merger that involves a nonprofit organization, you must get a written consent from eAttorney General of California. It is further argued by the California Secretary of State (2013)that if you are interested in the merger involving nonprofit organizations, it will be advisable for12 | P a g e
  • 13. you to read the specific Corporation Code sections between the lines. This is necessary if youare keen on fulfilling all the legal requirements.All the merger documents have to be mailed to the Secretary of State. The Secretary has aDocument Filing Support Unit. On the other hand, you can deliver the documents personally totheir Californian Office 1500 11th Street.Fees for filing a mergerIt costs $100 to file a merger in the state of California. In addition to that fee, there is thepayment of an additional fee of $15 which is non-refundable. This fee is used for the purpose ofprocessing the documents that you send them. You can request the processing of the fileddocuments within the guaranteed time frame if you pay an extra fee of $15 for the documentsthat are dropped in person.Copies: It is normal that you may want to print the copies of merger or acquisition documents.This cannot be possible due to the system limitations. A request for copies can be made usingthe Business Entities Records Order Form available on the California Secretary of State website.The process is very simple. You will be required to enter the Corporation name or thecorporation number at the top of the site and then submit the request. In case the corporationname does not appear in the search results, you will be required to file the request personallyat their Sacramento office or through mail. iv. Recent shareholder communicationsMany important arguments have been made by Wolff (2009) that shareholder communicationsis very important during the process of mergers and acquisitions. These shareholders mustalways be informed on what is going on.In the past the management boards rarely communicated with shareholders directly. Theshareholders believe that the directors may have ideas which are different from those of themanagement staff. They are therefore given a mandate to exercise independent judgment onimportant matters which affect the corporate performance of the company.That is a clear indicator that investor expectations have changed over time. Therefore, manyboards have made it a common practice to discuss with the shareholders all the importantmatters affecting the company.Matters such as mergers and acquisitions have to be deliberated on with the investors in mind.They have to be convinced that the undertaking is worth. The shareholders have to be treatedequally as the other stakeholders. A systematic process must be established for the solepurpose of outbound communication with the shareholders. In fact the board should have awell established shareholder communications policy as well as a method of dealing withinbound communication as well as inquiries.13 | P a g e
  • 14. The shareholders must be informed on matters of interest such as CEO evaluation andsuccession, corporate strategy, executive compensation, director nominations and boardstructure after the merger and acquisition process. It is a good practice to meet with theshareholders and discuss their proposals before filing a bid. This is the right time to dispute theclaims of investors who are against the merger and acquisition. This way the company will be ina position to prevent the spread of wrong information which is likely to cause personalembarrassment during the annual general meeting.The directors who meet the shareholders must be thoroughly prepared. They must have aproper understanding of all the issues that are facing the company. They should also anticipatethe most likely questions that they will be required to answer. They should also find the bestway of answering those questions. The best way depends on the shareholder investment styleand how long they have held the company shares. Directors must learn never to be caught off-guard because it will have a negative effect on their credibility.When discussing the important issues on mergers and acquisitions, a director must learn howto conduct the face-to-face conversations with the shareholders. Make sure that you answertheir questions appropriately and still remain with the Regulation Fair Disclosure boundaries. Toachieve that end, the directors must undergo a through training. The directors must stayinformed on all aspects of their company. The pre-meeting board package plays a key role ingetting the directors informed by giving them a detailed analysis of the company shareholderbase as well as the most recent changes on company ownership changes and topics which areof great interest to the shareholders.To get the best out of the director shareholder communications, you must incorporate afeedback mechanism to track all the reports resulting from the original communication. Thecompany should regularly review such reports and incorporate them in their day-2-day runningof the company.During the merger and acquisition period, the company will be expected to communicate withthe shareholders on a regular basis. That is one of the best ways to help the shareholders inunderstanding the policies of the company. This is the time when transparency as well asaccountability is highly rated by the shareholders. There are many benefits that the companycan accrue due its openness to the shareholders. The media and the community will have ahigh regard for such company. v. Certificates of operating authorizationThere are many certificates of operating authorization.14 | P a g e
  • 15. vi. Minutes of board and other meetings3. Issued Securities: a. Not only is current ownership important but due diligence must incorporate the analysis of any and all warrants, options and other instruments that may become due during or because of any transaction b. Items to check: i. Copies of stock certificates ii. Copies of warrantsWarranties are very important because they play 3 important roles during the merger oracquisition. It is argued by McNeill et al(2000) that the warranties help the buyer inunderstanding the Target Company and in conducting due diligence. Secondly, the warrantiesmake it possible for the buy to refuse to close the deal in a case where the warranties are nottrue during the closing time. Finally, the warranties make it possible for the buyer to becompensated for damages in case a presentation turns out to be false. iii. Copies of optionsIt is argued byMcNeill et al(2000) that there are two ways of dealing with copies of options. Youcan either cash the options out or alternatively you can assume them. It is a good idea to readthe agreements and the terms of the equity plan contained on the options copies. Remember,you are not tied to those agreements. The two parties of the merger or acquisition cannegotiate on a different way of treating the equity other than that indicated on the options.There are some cases which will require the consent of the optionees.CashoutThis occur when the option copies are cancelled and payment made for the aggregate spreadon those options. Spread is the difference between aggregate deal price and the aggregateexercise price. McNeill et al (2000) further argues that there are some cases where theoptionees are paid a premium price to cover for the lost opportunity to participate in the futureincrease in the buyer potential. The cash out are the buyer’s favorites. On the other handoptionees like the cashout also. iv. Stock register v. Shares issued and when15 | P a g e
  • 16. vi. Holdings by percentage vii. Outstanding preferred stock viii. Any applicable covenants ix. Outstanding warrants, options and other securities x. Options and other employee benefitsThere are many cases where a merger brings in completely new benefits for the retainedemployees. The benefits are a very important part of any employee compensation. Thoseemployees in the acquired company will have a lot to worry about. They will worry on what willhappen to those benefits that were accrued with their employer before the sale of thecompany. The concerns of the employees will not be limited to those of the pension plan. Theywill also want to know more about their vacation allotments, accruals and flexible spendingaccounts.The purchasing company must therefore carry out a thorough research in order to understandthe employer’s policies and benefits and then go on to explain how those benefits will beaffected after the purchase.You will also be required to explain the new benefits that the employees will get as a result ofthe merger or acquisition. The sale will come with new carriers as well as procedures and evenenrollment procedures. All aspects of the benefits must be explained vividly and any newexpectations must be set at every point.In case the acquiring company has plans to credit deductibles, you must indicate that there is alag time in which the claims are run out through the previous plans before the completeapplication of deductable credits is done. Give an explanation on whether your company willrequire an electronic file from the previous vendor or you just need to give an explanation ofthe benefits to meet part of deductable.The acquiring firms should also give an explanation on how they are going to treat the otheraspects such as dental work on progress. The employees may also have their childrenundergoing treatment or the employees who are getting their crowns replaced. You shouldclearly explain how they should submit such claims and then let them know which plan willcover them.In other cases, the buyer may opt to just continue offering the seller’s plan as it is. This soundseasier because it does not affect the employees. You need to communicate that the benefit16 | P a g e
  • 17. plan will remain intact even under the new ownership. The only clarification that you need tomake is whether the fees and rates will remain intact.Compare the benefit structures, labor contracts, vacation policies, benefit eligibility, retirementplans, and sick plans among other important aspects. Then work on convincing the newemployees on the superiority of the new benefit plan that the company is proposing. After thecomparison of the two benefit plans, you will discover that the best move is through having atradeoff. That way the new plan will be widely accepted.Payroll ProcessA part from enrolling all the new employees in the benefit plans, it is also very important to addthem to the payroll system. You will need to do a lot of new-hire paperwork where all new hireswill have to fill W-4s so that the taxes can be deducted from the payments they receive. In caseof employees who use direct deposit, there is some appropriate authorization forms that mustbe completed. xi. Employee stock ownership4. Financials: a. The numbers and the care with which they are prepared say a lot about a company; check the content as well as the presentation. b. Items to check: i. audited financials since inception ii. Balance sheetsIt is argued by Evans(2000) that the Balance Sheets have to be reworked for over a period of sixmonths if you are aiming to get have a successful merger. When the acquiring company spendsbetween 4 to 6 months on perusing the documents, there is a likelihood of getting the mostrealistic worth of the Target Company. There are a number of areas that you will need to focuson as you study the Balance Sheet.Look out for those assets which have been overvalued. These are called low quality assets. Youmust find out their relative market values. It will equally be a good idea to scrutinize theliabilities and identify those liabilities which are understated. These can be allowances, baddebts and pensions. Again there may be some hidden liabilities such as cases of contingenciesfor lawsuits which are never recorded.The Inventory should be reviewed with a lot of care so as to identify the overstated inventoriesif any. If you discover that the inventories are rising over a period of time, then, it is an indicator17 | P a g e
  • 18. that there is lack of marketability or rising obsolescence. There is also likelihood that LIFOreserves are causing a distortion.If the receivables are overstated, it means that those receivables are not collectable at all. Thisis a common observation in the case of intercompany receivables.The Balance Sheet should be analyzed to determine the valuation of the short-term marketablesecurities. There are cases where you will discover that the Target Company is holding thosesecurities. Find out whether those securities are valued well. A case where the company isholding investments, check whether they are overstated to avoid any trouble.Intangibles:Many companies forget to value some intangibles such as brand names properly. Therefore,check whether they are undervalued as it is the case in most cases.In the normal circumstances, it should be easier to see the difference between market andbook values. In case you find that there is no difference between the two, then, there is someserious manipulation on the submitted documents. iii. Cash flows iv. Accounting methods and practicesIt is very important for you to understand on how you are going to check on the accountingprinciples of the Target Company during mergers or acquisitions. There are two techniques thatare used to account for mergers and acquisitions currently.The whole merger or acquisition transaction is treated as a purchase. You will be required torestate the assets of the target companyin fair market value. Then get the difference betweenthe prices paid and the fair market price which is paid. The difference is posted to the BalanceSheet under goodwill.The book values of two companies are combined when mergers or acquisitions take place. Inthis case, the goodwill is not recognized.This is called pooling of interest and it is only applicablefor companies that involve stock only.During the old times when physical assets were very important, the Purchase Method was veryapplicable accounting technique during the mergers and acquisitions.Nowadays, companieshave put more value into intellectual capital as well as other intangible aspects of the business.That explains where people value the Pooling of Interest Method. It is currently the mostcommon Merger and Acquisition accounting method. If you fail to recognize the intellectualassets of a company, you can only get distorted financial statements.18 | P a g e
  • 19. It is argued by Wood and Sangster (2006) that when a business is sold in a merger, the sellermakes a lot of money through goodwill of the business. The purchasing company gains a lotwhen it buys a company a going concern outfit. When a business is bought through a merger oracquisition, there is no need for the seller to re-evaluate the assets and record the updatedinformation in his books. It will be the duty of the purchaser to record the changes in assets inthe balance sheet as indicated above.It is very important to spend enough time scrutinizing the accounting records even if it involvessome investigative methods. You can send some undercover agents to confirm the financialrecords which are presented to you. It is argued by Evans (2000) that things can go wrong if youdo not carry out some excellent due-diligence. There are real life examples where things havegone wrong in the past. A perfect example was the merger between CUC International and HFSInc. The merger was announced and then after 4 months, it was discovered that there weresome serious accounting irregularities. After the news was announced, the newly formedcompany - Cendant- lost over $14 billion in terms of the market value. v. Revenue recognition policies vi. Management accounts vii. Budgets and projections viii. Business plan ix. Accounts receivableanalysis x. Accounts payable analysis xi. Pricing plans and policies xii. Revenues and margin by product xiii. Extraordinary income/expenses xiv. Analysis of material write downs xv. Bad debt summary xvi. Any outstanding contingent liabilities19 | P a g e
  • 20. xvii. Any external financial reports/studies5. Tax: a. Different jurisdictions have different tax regimes; but they all view unpaid or undeclared tax with disdain. Verifying compliance with tax law is vital b. Items to check: i. Federal tax returns for 3 years ii. Local or state tax returns for 3 years iii. Details of any government audit iv. VAT Registration for EU Companies6. Contracts: a. Contracts secure supplies and generate liabilities both need to be understood; this process should also be looking for missing contracts (e.g.: no formal deal with a key supplier). b. Items to check: i. Bank lending ii. Non-bank lending iii. JV agreementsThe joint ventures programs are allowed by many states in U.S. The participating firm’s need awritten approval from the state’s Attorney General.During a merger the purchasing corporation must scrutinize all joint ventures entered by thetarget corporation to ensure that they do not violate any state laws and regulations. The jointventure should not threaten or affect competition in the industry. That means the joint ventureshould not lead to the formation of a monopoly by controlling a large market share. iv. Partnership agreements20 | P a g e
  • 21. v. Liens vi. Equipment leases vii. Mortgages and other loans viii. Insurance contracts ix. Supplier contracts x. Vendor contracts xi. Other contracts7. Official: a. Many jurisdictions require authorization for various forms of business; verify what permissions are needed and confirm that they are in place and can be transferred to a new owner. b. Items to check: i. Copies of permits ii. Copies of licenses iii. Registration certificates iv. Reports to official bodies v. Request from official bodies8. Litigation: a. Litigation, even when you are in the right, can be crippling expensive so an understanding of any actual or potential legal cases is vital. The absence of litigation should be a seller warranty. b. Items to check: i. Pending litigation against target ii. Potential liability iii. Potential costs21 | P a g e
  • 22. iv. Pending litigation by target v. Potential liabilityThere are many sources of potential liability which must be factored in during the pre-acquisition stage. You must check whether there are any union agreements. If any, read theunion contract in order to determine the best compensation and benefits strategy. Then findout how that affects the committee’s liability assessment.By reviewing the administrative process, you will find out whether the organization has asystematic approach that can be beneficial to the administration. You can make a conclusionbased on the request for records during the due diligence process. If the documents are wellmanaged and organized, you might be heading somewhere. A haphazard administrativeapproach will spell trouble later on.The Committee must take enough time to have an in-depth review of the target companyduring the due diligence phase. This is important to avoid getting surprised later on by liabilitieswhich were never anticipated. vi. Potential costs vii. Settlement documentation viii. Employee litigation/claimsYou must identify all the ongoing disputes with current and former employees or theemployees who are undergoing a difficult situation which may turn into a law suit. Thecommittee must try to find out if the law suits can be converted into dollar amounts aspotential risks. ix. Patent actions x. Intellectual property actions9. Products: a. What the target company sells (products or services) must be fully understood if any transaction is to be completed successfully. b. Items to check: i. Product/service offering22 | P a g e
  • 23. ii. Market share by product iii. Total market size(s) iv. Inventory analysis v. Inventory valuation vi. Obsolescence policy vii. Product backlog analysis viii. Product seasonality ix. Major suppliers x. Supplier spend analysis10. Marketing: a. Every business should know and understand its competitors and its key clients; verify that the target company understands and has delivered this basic. b. Items to check: i. Competitors23 | P a g e
  • 24. ii. Competitors market share iii. Major clients iv. Major client income v. Pricing strategy vi. Marketing collateral vii. Brochures etc. viii. Sales projections by product ix. Commission structure11. Personnel: a. Employees are often the most valuable resource for a target company; it is vital that checks are made to ensure they will remain committed to the new owners. b. Items to check: i. Organizational charthttp://www.aon.com/human-capital-consulting/consulting/mergers_acquisitions_solutions.jspEvery time two companies combine in mergers and acquisitions, there is a great change in theorganizational chart of the two organizations. This change is necessary in order to achieve newgoals. The success of the new outfit depends on how the stakeholders manage change in thetwo separate entities uniting into one body. There are divergent values as well as traditionsthat need to be harmonized. Organizational change demands that you prepare your team wellby the creation of a compelling vision statement and working hard to overcome resistance tochange through explaining why change is good for the company.You will be required to involve all the senior managers in the process of creating a neworganizational mission. Define new strategies and objectives all based on the merger. The twomerging companies can play different roles. In some cases, the target company once it ispurchased takes over the branding efforts. There are many types of mergers. Competingcompanies can merge to form new entity. If it is a vertical merger, a company merges with oneof its customers. Whatever the case, the merger should reflect a new outfit even in the24 | P a g e
  • 25. organizational structure. Care must be practiced in cases where you are forced to removeredundancy in the new company.When working on the organizational chart, involve your employees on all stages of decisionmaking as much as possible. Allow your employees to ask their questions as much as possible.Study the corporate culture of the two companies involved. You will need to plan well in caseyou are dealing with an organization that is run collaboratively and the traditional top-downorganization. To merge the two cultures requires you to identify the best aspects from bothsides.It is argued further by AON (2012) that the best way to introduce changes is throughempowering your employees to initiate the changes.The new organization’s vision should beperceived to address the current problems and finally results in a better business life.All activities and programs organized by the company must be aligned to the brand newstrategic plan. Indicators for every program must be put in place to watch the progress towardsachieving set goals.You will need to be patient and allocate enough time for the transition to take place. Employeesshould be prepared to let go of their old practices that they have been following and adopt newones. It normally takes time to get used to working with new people in new places.The new company should put in place a coaching program that guides employees in discoveringtheir new roles. This should be followed by an orientation program that will make it possible forall functions to work as planned.Using your indicators, you should monitor the working of the company. You can start evaluatingcustomer satisfaction after a period of six months. Adjustments should be made in order tohave a positive impact on customers.You can communicate the changes more effectively through the use of intranet sites, email andnewsletters. It is also a good idea to make use of the social media, blogs as well as forums. Hereyou can give a detailed explanation on the changes that will have to take place because of themergers. With such a good communication, you will be able to avoid the spread of rumors andpropaganda.The retention strategy process must start earlier before the merger and acquisition starts.Retaining key talent starts the retention process. The most successful mergers andacquisitionsin the world have a reputation in retaining talent.Most companies make use of retention agreements with their employees. Those companiesthat have been involved in mergers and acquisitions have been very effective due employeeretention. Some companies retain all employees or better still a majority of former employees.In North America, employers have a custom of using retention bonuses.25 | P a g e
  • 26. You can also use performance based metrics to offer retention bonuses. In today’s businessworld, the companies are aiming to retain the highly skilled employees to use their skills indeciding whether or not to enter into a deal.Employees from both the purchasing and the target firm will raise concerns about the future oftheir jobs. The acquisition committee should not only focus on the administrative issues, theacquisition is known to have an overwhelming effect on the employees. These people knowthere are some adjustments that must be done on the two organizations in order to streamlinethem. Those employees whose job descriptions overlap may find themselves out ofemployment.In many cases, the streamlining process only affects a small section of your workforce. The factis that all the employees will be worried. To help employees know what the future holds forthem, you must keep them informed. In a case where you want to merge some departments, itwill be a good idea to let them know it. Give them as much information about your plans as youcan manage. Inadequate communication will raise worry amongst your employees. They valuetheir job security as much as you value your company. ii. Blogs for senior staffThe mergers are never complete until they are formally closed. There is a need therefore forthe two companies involved to prepare proper communication plans for the announcementday during the pre-close time. It is argued by Harrison (2013), your M&A communicationsshould majorly focus on senior staff, customers, key suppliers, shareholders and other partnercompanies.You can start by appointing a number of spokespeople for each audience as well as the mostpreferred communication channel. The next thing to do is create a calendar of activities startingright from the day of announcement all through the 90 days period leading to the proposedclose date.The communication from the senior staff can be from various departments. The purchasingcompany should learn to use the most influential individual from all departments to facilitateinternal communication.It is argues by (Davenport and Barrow 2012) that the senior staff at the CorporateCommunication and Public Affairs departments will be at the centre of facilitatingcommunication programs. The direct of corporate communication will play a key role inconvincing the shareholders and the media to support the merger or acquisition. A lot willneed to be done because the audiences to be addressed are mixed up. Actually, there is anoverlap. There are some employees who own shares and shareholders obviously read thepapers. The customers also communicate with the employees. There is need for planning forseparate communication to each group of people. The important thing is to be consistent in26 | P a g e
  • 27. passing the key messages to the different groups of people. The senior staff must employ theuse of mass communication tools in order to be effective.Role played by Senior Staff in the Human ResourceThe senior staff at the Human Resource department will offer their expertise in handling peoplewith different levels of knowledge as well as attitudes. These are the people who have a properunderstanding of the people in working for the union as employee representatives. These arepeople who understand corporate working culture. They will play a key role in educating otheremployees on matters of culture. The HR department will effectively answer questions fromother employees regarding pension and career prospects.Senior Staff at the Marketing DepartmentThese are people who are close to the customers. They understand matters dealing withbrands. They will assure customers that they will continue to meet their needs. They haveplenty of knowledge on how to run huge events for employees and how best to engage theirintellect as well as emotions.They will also set a firm foundation for creating the employer brand after the merger oracquisition process is done. They have full knowledge about brands and how to create them.Senior Staff at the CEO’s officeThe senior employees at the CEO’s office are equipped with the most up-dated information oncurrent affairs regarding the mergers and acquisitions. These are people who can get thingsdone through the use of the CEO’s name. These people have colleagues and allies in otherdepartments.The communication experts have an important role to play in helping leaders streamline theircommunications to various stakeholders. These experts should be involved as earlier aspossible to help the senior staff members to streamline their communication process. Allcommunication from the purchasing company should build a great story on why the merger oracquisition is necessary.It is very important for the leaders from the bidder and target companies match their actionswith their words. These leaders are always under constant watch from the employees to findout whether they are true to their words.It is further argued by Devenport and Barrow (2012) that the communication experts shouldnot invent a good story which is undermined by the actions and words of the leaders. In suchcase, it will be wise to have a consistent story despite the fact that it may be less attractive tothe audience.27 | P a g e
  • 28. Staff Communication is essentialThere is very little that the company can talk about integration until the deal closes officially.Instead of keeping silent, you should actually increase the rate of communication. There aresome small and large issues that you can tackle. It has been argued by (Harrison 2013) that thefinance and accounting departments will have many issues to address during this time. It is veryimportant to capitalize on the internal traffic through the provision of small amounts ofinformation that reassures to the employees of all ranks. This kind of communication will helpin the process of lessening the tension caused by the announcement of the deal.Communication should be done relentlesslyIt is common for tensions to rise on both sides of the merger or acquisition. This happens bothfor employees and the management staff. The fears arise because it is true that saving costsrequires the elimination of redundancies. The employees holding duplicate positions are theones exposed to great risk of losing their jobs. The second groups of people who can beeliminated are those employees whose contribution to the organization is little. It is certain thatthere will be organizational changes. The only difference is the size of those changes.The period before closing a merger and acquisition deal should ideally be covered by constantcommunication. In case you leave the communication void, there will be a lot of uneasinessamong the workers bringing about the sense of negativity.After making final touches on the deal, the company should make use of the respective seniormanagement team to make the new company work well. After the close of the deal, the firstchallenge that is faced is the communication style of the two companies. As you wait forintegration to start, the senior managers are required to work as a team by explaining theprocess that will be adopted in making decisions.Stage Communication to Audience ContentPre-merger or acquisition  Realities in the Address rumors and current industry fears.Due-diligence None NoneAnnouncement  Fast communication to Addressing current rumors be a head of the and fears media.  Ensure consistence in Address the reactions to the the main ideas. announcements Evaluate the current knowledge of the workforce on the merger or acquisitionStage between  Process and timetable  Address current28 | P a g e
  • 29. announcement and  Start making rumors and fearscompletion announcements on  Views from the strategy and structure representatives about the proposed merger or acquisitionDay One  Consistent main  Channels for individual messages views  Initial reasons and  Address fears and decisions made rumors  Process and time table  Ways of involving people in the process  Effects on individuals1st 100 days  Supply new details  This is the stage for when they are due creating the new  Watch for the organization overloadBuilding the existing business Expose the vision, mission and Using this chance to create values of the brand new the new organization organization iii. Labor/employment disputes iv. Employee compensation plansThe Financial Directions (2009) argues that the issues related to employee compensation plansare the most complex to deal with during pre as well as post-acquisition. The selectedcommittee must therefore put aside enough time to work on employee compensation plans.This process should take place during the pre-acquisition so as to allow the smooth flow of theprocess later on. During the post-acquisition period, there will be limited time to work on thoseplans satisfactorily. This is a step towards a smooth transition. v. Pension scheme29 | P a g e
  • 30. The retirement plans should be part of the benefit review process. They should also bediscussed with the stakeholders. Give a vivid explanation on how the new firm will transferyears of service and credit them under the retiree pension benefitsif possible. It is a commonpractice to bring in the employees from the acquired firm as of the date of sale. These newemployee in most organizations are never subjected to the new hire waiting period. vi. Option/profit share plans vii. Management incentives viii. Options/profit share ix. Non cash payments x. Non salary compensations xi. Medical and other insuranceYou need to check out whether there are any ongoing and expensive medical claims. Thesemust be considered as ongoing liabilities as you set the purchase price. xii. Cars travel etc. xiii. Employee agreements xiv. ConfidentialityIt is very important to keep matters strictly confidential before announcing the merger or theacquisition. It will be a great mistake if the shareholders, customers, employees and suppliersare allowed to find out about the intended merger. This will have a damaging effect on thetarget company. That company will loose a lot of value and key employees will also offer their30 | P a g e
  • 31. resignation, customers will switch to the competing corporations, productivity will fall and thesuppliers will make up their mind not to renew their contracts among other undesirable events.Therefore, there is need for the two participating companies to enter into ConfidentialityAgreement.The Confidentiality Agreement requires that the acquiring corporation should never contact theemployees, owners, owners and other people associated with the company to be acquired.The company should also make sure that they do not distribute any information regarding thecompany to the outside parties. They should also agree never to use the information they getfor any other purpose apart from proposed merger evaluation. xv. Non-compete xvi. IPR protection xvii. Consultants xviii. Consulting agreements xix. Employee numbers xx. Absenteeism/sickness records(YMSC 2009) During the sale process, you will be required to consider the employees who havebeen disabled by sickness. In the event that the employ is not permanently disabled, give areturn to work formula for such employee. Ensure that the new employees have life coverage.Some companies have a life plan that requires the employees to be actively working beforebeing covered. In case, your company plan cannot cover the new employees, then, ensure thatall those employees not working apply for premium waiver. You can request your life carrier toaddress the issue through continuity of coverage.Make sure you do an evaluation of the company disability plan. There are limitations on long-term disability contracts. Find out from you carrier whether they will waive the existingconditions on limitations or if they will apply credit for all the employees hired due to the31 | P a g e
  • 32. acquisition or merger. In case there are major contractual differences the purchasingorganization should take time to explain well.Take time to evaluate the life insurance plan. Find out how you can factor in the employeeswho are absent from work during the time of sale due to sickness. It is a common practice torequest the new carrier towaive for those employees who are at work to accommodate thenew employees and hence make it possible for continuous life coverage. xxi. Employee manual(s)It is the duty of the new employer to make sure that all the new employees get all thenecessary information that is required by the law. This information is usually provided duringthe new employee orientation process. In some organization the information is provided afterthe employee enrolls in the health plan. Even if you have a large number of employees, thisstep should never be overlooked. The merger or acquisition makes it necessary for you tosupply sufficient information regarding the procedures at the new place of work. Therefore, itwill be in order for you to give all the new hires a copy of your employee handbook. This isnecessary become different companies have different procedures and policies. It will thereforebe your duty to ensure that the new employees receive this information promptly.Referenceshttp://www.ftc.gov/speeches/other/dvperumerg.shtmFederal Trade Commission*Kuenyehia, K. (2010). Seven Strategies of negotiation for M&A.xxxxxxxxxxxxxxxxxxxxxxWolff, M. 2013.Board shareholder communications.Maureen WolffPresident & Partnerhttp://blog.investorrelations.com/2009/12/01/board-shareholder-communications/Acessed on: 22nd Jan 2013: 8:30pmXxxxxxxxxxxxxxxx32 | P a g e
  • 33. YMSC.Imaa Institute. 2009. Managing Mergers and Acquisitions, Weston Parkway:Xxxxxxxxxxxxxxxhttp://www.aon.com/human-capital-consulting/consulting/mergers_acquisitions_solutions.jspxxxxState of Californiahttp://www.sos.ca.gov/business/be/filing-tips-corp.htmhttp://www.sos.ca.gov/business/be/filing-tips-corp.htmWood, F. and Sangster, A. (2006).Business Accounting 1. Harlow: Pearson Education Limited.33 | P a g e

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