How do mergers and acquisitions work?

Mergers and acquisitions (M&A) are a type of business transaction in which two or more companies combine or one company takes ownership of another. M&A typically involve a combination of both companies’ assets and liabilities and the transfer of ownership of one company to another. The process starts with a company initiating the proposed merger or acquisition. After the initial proposal, the two companies will enter into negotiations, which typically involve a due diligence period in which both parties examine the other’s finances, assets, liabilities, and other important records. This helps to ensure that both parties understand what the deal entails and that all parties are entering into the transaction understanding the same terms and conditions. Once the due diligence period is complete and both parties are in agreement, they will draft a merger or acquisition agreement. This agreement typically includes the details of the transaction, such as the terms of payment, the timeline of the merger or acquisition, and any other conditions that have been agreed upon by both parties. Once the agreement is finalized, it must be reviewed and approved by government regulators. In South Carolina, the state’s Securities Division is responsible for overseeing mergers and acquisitions and ensuring that all terms of the agreement comply with state laws. After the merger or acquisition is approved, it will go into effect once all conditions of the agreement are met.

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