It’s quite clear that the pandemic has put a lot of stress on the world of business. It has pushed people to work at home, and companies generally have to change how they do business. One significant transaction done in the business world is corporate mergers. An example would be the recent announcement of Broadcom’s potential acquisition of VMware for $61 billion this year. That’s how big of a transaction business mergers are and why they are essential to the business world.
Corporate mergers happen almost every day, but that’s before the pandemic. They’ve drastically slowed down during the pandemic because it’s a primarily physical process. Here’s what you need to know about corporate mergers, how they happen, and how your business can do it during the pandemic.
What are Corporate Mergers?
For amateur entrepreneurs, corporate mergers are usually two companies coming together as one. It can happen in a few ways, but the most common one is when one company buys another company. In this scenario, the acquiring company usually has more money and resources. So they’re buying the other company to expand their business or eliminate the competition.
Another way corporate mergers can happen is when two companies come together to form a new company. In this scenario, both companies are equal partners in the new company. However, this happens less often than one company buying another because it’s harder to find two companies that are compatible and have complementary strengths.
In either case, a corporate merger is a big deal because it can significantly impact employees, shareholders, customers, and the overall business landscape.
How Corporate Mergers Happen
Corporate mergers usually happen in three steps: announcement, due diligence, legal proceedings, and closing.
Announcement
The announcement is when the two companies publicly announce their intention to merge. This is usually done through a press release or a joint statement. Once the announcement is made, the due diligence process begins.
Due Diligence
During due diligence, both companies will go through their financial records to ensure everything is in order. They’ll also negotiate the terms of the merger and figure out how the new company will be structured. Once both companies are happy with the details, they’ll sign a merger agreement and begin merging their businesses.
Legal Proceedings
The legal proceedings usually take place in a courtroom, but they can also happen through arbitration or mediation. Both companies will present their case to a judge or panel of judges in this step. They’ll argue over who gets what assets and how people will run the new company. Once a decision is made, the two companies will start closing the deal.
Closing
It’s when both companies finalize all the paperwork and become one company. Usually, the acquiring company’s shareholders will end up owning the majority of shares in the new company.
During a pandemic, corporate mergers are still possible, and arguably, they are much simpler if you know what you’re doing.
The Digitization of Corporate Mergers
Because of the pandemic, corporate mergers have become much more digitized. In addition, the entire process can now be done remotely, making it easier and faster to do.
Announcement
The first step, the announcement, can still be done through a press release or joint statement. But now, instead of having to meet with each other physically, the two companies can hold virtual meetings to discuss the details of the merger. Moreover, companies now hire journalists to write about the merger when announcing it to the public instead of doing it live. So when planning to do your merger, make sure to do the same things.
Due Diligence
The due diligence process is where things have changed the most. Instead of physically going through their financial records, both companies can now do it electronically. It speeds up the process and makes it simpler to do. It’s one of the main reasons why your business should get cloud services.
Legal Proceedings
Virtual court proceedings are now possible, and it’s one way to do the legal proceedings of your merger. First, however, hire someone to document the entire thing. Hiring a professional video court reporter to document the merger can help you look back and see any details you might have missed. Reviewing these details is crucial as they can affect the overall outcome of the merger.
Closing
After all the paperwork is finalized, the two companies will close the deal. This can, once again, be done through a virtual meeting or even over the phone. The important thing is to make sure that all the documents are in order and that both companies are on the same page.
COVID-19 has changed the way we do business. And one of those changes is the way we do corporate mergers. The merging process has become digitized to ensure the business continues despite the pandemic. So make sure to implement these options when planning your subsequent merger.
