Vocabulary of Mergers & Acquisitions

There is much information that can be conveyed in even a brief statement about a transaction if certain vocabulary is consistently applied. Conversely, there is much confusion that can be caused – and delay and expense incurred – if that vocabulary is not given due respect. The following is a general discussion of some terms relevant to organizational transactions often involved in discussions of “mergers & acquisitions.” 
merger requires at least two constituent organizations (or “constituents”). After a merger, the surviving organization (or “survivor”) will retain its legal existence, but each non-surviving organization (or “target” or “merged organization”) loses its separate legal existence. Generally, the survivor will come away from the merger with all the assets and liabilities of the target, in addition to the survivor’s pre-merger assets and liabilities. When reviewing organizational records, look for the Articles of Merger, typical with corporations and LLCs, or the Statement of Merger, typical with partnerships. 
consolidation involves at least two constituents joining to form and become a new organization, often vaguely called a “resulting organization;” it is a fairly rare type of transaction. 
conversion allows an organization of one type (e.g., a corporation) to charge its form to another type (e.g., an LLC). When reviewing organizational records, look for the Articles of Conversion (for a corporation or LLC) or a Statement of Conversion (for a partnership). 
domestication allows a foreign organization – that is, one formed in another jurisdiction – to become a domestic organization – that is, one now governed by the statutes of the new jurisdiction applicable as though the organization had been organized in the new jurisdiction initially. 
An exchange involves an organization, the acquirer, purchasing some or all of the shares or membership interests of another organization; it is commonly called a “stock sale”. (In this context, “purchasing” means “voluntarily receiving;” there are a myriad of possible terms for such a transaction, and it may or may not involve an easily identifiable “sale.”) 
An “asset sale,” sometimes vaguely called a “transfer,” involves an organization purchasing assets of another organization. Most usage of the term involves a transfer of all or substantially all of the assets, leaving the other organization legally existing but with few assets, if any. If an organization has no assets or ongoing operations, the organization is “defunct.” 
Some usage of “acquisition” is to differentiate a stock sale, or “merger,” from an asset sale, but more common usage of “acquisition” is functionally synonymous with “merger” but connotes that the survivor has substantially more power or control than the target. 
Capitol Lien can assist with filing and retrieving public records regarding mergers and similar transactions.
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