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How do you merge two companies?

Updated: 9/14/2023
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14y ago

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Have boards of directors and shareholders of both companies approve the merger.

2File merger forms with your secretary of state. In most states, merging two companies into one is considered a simple reorganization and thus tax free. Check your state government's Web site to see if the form is available for easy computer download.

3Work with a corporate lawyer who specializes in mergers and acquisitions, also known as an M&A lawyer. Mergers usually require a great deal of back-and-forth from both sides in order to arrive at a situation that's acceptable to both parties.

4Incorporate mediation guidelines within the new business model to provide guidance in times of disagreement.

5Know that you will lose all the advantages of name familiarity of the company that will be absorbed by the new, parent company. Decide which company can better afford that loss.

6Prepare for the typical jockeying for position in management within the new firm, as roles are recreated.

7Know that it's easier to simply merge one of the existing companies into the other than it is to create a third, separate company. This saves you from having to create a new corporation before any of the merger transactions can be accomplished.

8Be aware that the creditors of the company that becomes subsumed into the other will still have claims against the new, postmerger corporation. Just because the name disappears doesn't mean liabilities disappear as well.

9Trade the stock from the earlier, separate companies for the stock of the new parent company.

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