Dynamic changes in the economy force companies to flexibly adapt to the ever-changing situation. One way to grow and expand into new markets is to acquire other companies in order to gain their customers, acquire the technologies they use or take advantage of the good market position they have achieved in further areas. Merging with competitors to take advantage of synergies, reduce costs, improve profitability and gain greater market share is also a way to expand the reach and size of the business. In addition to their economic dimension, both mergers and acquisitions also produce certain legal effects. While the business objectives of strengthening a company making an acquisition or merging with another company may be similar, the mechanism of action and legal consequences will be quite different. CORPORATE MERGERS AND ACQUISITIONS - WHAT ARE THE DIFFERENCES BETWEEN THEM?
Share deal and asset deal acquisitions
Acquisition of another company in light of the current Polish economic reality is connected with the acquisition of such a number of its shares or stocks that allows the acquisition of a sufficient number of votes at the general meeting of shareholders in the case of a joint stock company or at the meeting of shareholders in a limited liability company. This makes it possible to gain the ability to shape the business conducted by the acquired company by filling positions on the board of directors and appointing members to the supervisory board or the audit committee. An acquisition of this type is known as a share deal.
Another option is the acquisition of a business, the so-called assets deal. In this case, the acquiring company buys the assets belonging to the acquired company, while its liabilities remain with it. In acquisitions involving the purchase of an enterprise or a specific part of it, such as a branch, only those rights and obligations are transferred to the buyer that connect to the assets that are the subject of the contract being concluded.
The purchaser of an enterprise taking it over under an assets deal is liable for the obligations incumbent on it in the same way as on the transferor, but the former is burdened with them only up to the amount of the assets taken over.
In a takeover by purchase of a company, the burdens associated with the employees of the acquired company are transferred to the acquirer, unless the subject of the agreement is a separated part of the company. In that case, the liability of the acquirer and the transferor of the company is joint and several.
In a merger, a situation occurs in which a capital company incorporates another company into its organizational structure, which entails the termination of its legal existence. In such a situation, the shareholders or stockholders of the absorbed company may receive shares or stock in the merging company. The procedure can also be carried out in another way, in which case a new capital company is formed from both entities, and the merging companies end their existence.
The condition for carrying out the merger is that the companies that carry out the merger function in the form of a corporation or partnership, but the entity that will remain after the whole procedure is carried out will be a capital company. The entity remaining as a result of the merger enters into all the rights of the absorbed company or both merging companies, becoming their legal successor.
This also applies to matters relating to employees employed by the companies involved in the merger. As soon as the procedure is carried out, they become employees of the newly formed company or the company that absorbed the other company, employed under the existing conditions.
Selected restrictions on mergers and acquisitions
Conducting mergers and acquisitions has its limitations. They involve, among other things, concentration laws, regulations related to foreigners and provisions related to agricultural land. According to these, for entities that have or may obtain a dominant position as a result of a merger or acquisition, they must request permission from the President of the Office of Competition and Consumer Protection. This obligation, however, applies only to entities that in the previous fiscal year exceeded a turnover of €50 million, in the case of operating solely on the domestic market, or €1 billion when operating on the international market.
Under current regulations, in the case of a takeover of a company that owns agricultural land or shares in a company that owns agricultural land, it is only possible after the right of first refusal is waived by the Agricultural Property Agency. This does not apply only to agricultural properties of less than 0.3 hectares or publicly traded companies.
Restrictions on foreigners stem from provisions that exclude the possibility of a foreigner acquiring property located in Poland without the approval of the Ministry of Internal Affairs. This provision does not apply to companies and citizens of the European Economic Area, i.e. the countries of the European Union, as well as Iceland, Norway and Liechtenstein and Switzerland. The regulations on foreigners also do not apply to publicly traded companies and real estate not exceeding 0.4 hectares.