Hi everyone! Quick question - in a merger (not an acquisition), does one party get paid cash at "close," or is the entire value in the future growth of the companies now that they're combined?
Just to clarify - and I apologize if I'm getting my terminology wrong! - when I say "merger," I mean two companies combining assets into one entity in order to continue to grow by leveraging the strengths of each of the companies. When I say "acquisition," I mean one entity buying out part or whole of another entity.
Question about mergers
by a searcher from University of Minnesota - Twin Cities Campus
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This concept might work in a joint venture (perhaps something like Microsoft + OpenAi, where Microsoft contributes capital and OpenAi contributes IP) or 50/50 deal, but that would only work if the parties were contributing roughly equal value. FWIW, Canada has amalgamations (a concept that doesn’t exist in US corporate law) where a merger of this sort happens (two streams flow together into a new river)
In US corporate law, typically you would see the majority asset contributor establish and run the go forward company and then negotiate certain rights with the minority asset contributor (for example: tag rights, drag rights, preeemptive rights, transfer rights, # of board seats, consent rights in the course of a sale, etc.). Often this is done through negotiating rights around a specific class of units for the initial partners and rollover documents.