Key Factors To Consider When Assessing The Fairness Of Merger Terms

Posted on: 22 July 2022

When two or more businesses merge, the resulting entity can be pretty powerful. This is why it's important for the parties involved in a merger to carefully assess and negotiate the terms of the deal. If the terms aren't fair, it can lead to disputes down the road.

This post highlights a few key factors to consider when assessing the fairness of merger terms.

The Rights and Protections Afforded to Shareholders

After a merger, the rights and protections afforded to shareholders can change dramatically. This includes things like voting rights, board representation, and anti-dilution provisions.

In some cases, the new company may eliminate or reduce the rights of certain shareholders. For example, they may do away with voting rights or dividend payments.

The new company can also change the terms of existing shareholders' contracts. For example, they may reduce the number of board seats a shareholder is entitled to if their ownership stake decreases. This can make the terms less favorable to shareholders, which can ultimately have a big impact on the fairness of merger terms.

The key thing to remember is that shareholders have a vested interest in the company's success. Their rights and protections should be fair and reasonable before agreeing to a merger.

If you have any concerns, raise them with the new company's management team. With careful negotiation, you can help ensure that the rights of all shareholders are fair and reasonable.

The Treatment of Employees After a Merger

Employees can be one of the biggest casualties of a merger. In some cases, employees may be let go or have their roles changed. For example, the new company may decide to outsource certain positions in a bid to cut costs. In other cases, employees may simply be asked to take on new duties or report to a different manager.

In other cases, they may see their benefits reduced or their working conditions change. For example, the new company may require employees to work longer hours or move to a new location if it's more convenient for the business.

Employees should be allowed to voice their concerns and have a say in the merger. After all, they are the ones who will be most affected by the changes. They deserve to be treated fairly and with respect after a merger.

An experienced fairness opinion firm can help you understand how the terms merger will affect you and your employees. With this information, you can make an informed decision about whether or not to proceed with the merger. 

For more information, contact a local firm like Marshall & Stevens.


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