In order to have a better understating of merger and acquisition you have to grasp the difference between merger and acquisition to know the risks and legal obligation to avoid possible legal and financial traps in the future.
Merger: Putting it simply, Happens when to companies decide to merge and create a new legal person, the process happens when two companies are relatively equal and enjoy an equal amount of control over the new legal person. The new legal person might adopt a new name entirely but the name may also contain the names of the two company.
Acquisition: Happens when a legal person usually the one enjoying and wielding significant amount of power (in aspect of sheer size, personnel, business revenues, market share or perhaps financial advantage) take over another legal person, resulting in dissolvent of the other legal person but not creating a new one as is the case with merger, acquisition can also happen if the more powerful company can obtain 51% of the share of the other company, but still it almost always happens when two companies in question don’t have the same of level of power and or influence.
Hostile acquisition: hostile acquisition occurs when one company takes over another but does is so without the other company’s real consent and perhaps through means that are not complying with rules, regulations or ethics of market.
How to conduct merger and acquisition in Iran?
Negotiation:
It could be so that in case of merging two companies enjoy equal positions and endeavor to make their companies bigger, more assertive to acquire bigger share of the market or perhaps to launch new revenues, nevertheless merger negotiations must be conducted alongside professional legal team, as each company’s legal responsibilities, share and profit must be decided on, written and signed.
Not mentioning the fact that in the event of merger a new article of association must be drafted and new legal person must be registered.
Financial assessment:
Both companies must be assessed thoroughly, debts and credits assessed, this process must be done by professional auditors.
Legal traps:
It is possible that once two companies join forces they would devour market effectively kicking out all the current or potential players and create a monopoly; therefore, it is important to conduct any attempt at merger and acquisition while complying with completion law and consumer protection law.
Conclusion:
Merger and acquisition is a business tactic so that companies could enjoy bigger influence on the market or have bigger share of the market but doing so requires a substantial understanding of the process both legal and financial assessment of the situation , also it is important to defend your business against hostile take overs via help of professional legal team.
Given the legal consequences of both process and the fact, that is must comply with anti-monopoly, consumer protection act of Iran and labor code of Iran, every step of the process must be done alongside a professional legal team.