What a merger actually does
In a statutory merger, one company is absorbed into another, or both combine into a new entity, and the surviving company usually takes on the assets and liabilities of the one that disappears by operation of law. That means old lawsuits, tax issues, and contract obligations come along, which is different from an asset purchase where the parties can negotiate more about what transfers. Mergers require approval steps set by state law and by each company's governing documents, often including a board vote and a shareholder or member vote. Shareholders who oppose some mergers may have appraisal rights, allowing them to ask a court to determine the fair value of their shares, and the availability of that right depends on the state and the type of company. A certificate or similar filing with the state makes the merger effective.
Questions to answer before combining
For privately owned companies, the hardest issues are often governance: who will run the combined business, how decisions will be made, and what happens if the owners disagree. Agree on how each side's contribution will be valued, and test that valuation against what each company actually brings in revenue and obligations. Read major contracts, leases, and licenses to see whether a merger requires consent, since some contracts treat it as a transfer. Look at employee plans, benefit arrangements, and non-compete or non-solicitation terms that may conflict. Identify any pending disputes or regulatory issues on each side before signing.
How we approach the first stage
We start by asking whether a merger is the right structure or whether an acquisition, a joint venture, or a combination of assets would fit your goals better. We look at the tax consequences with your advisors, since choice of structure can affect them significantly. We then outline the approvals needed and the documents involved, including the merger agreement and the governance documents for the combined company. Where the owners will continue working together, we put particular weight on exit terms, deadlock resolution, and buyout mechanisms, because those terms are easier to agree on at the start than in the middle of a dispute.
