The Difference Between a Merger and an Acquisition

What is the difference between a merger and an acquisition?  The terms “merger” and “acquisition” are common business terms, but they are often inappropriately used interchangeably, when in fact the two transactions are rather different. If you are planning to combine or purchase assets from another company it is imperative that  you understand the benefits and drawbacks of each.

Merger

In a merger, usually two or more businesses wind down as separate entities, and then a new entity is formed – that is, two entities merge into one new entity. The assets and liabilities of both the original businesses are often carried over to the new company.

Recently, mergers have been especially prevalent in the healthcare and airline industries. For example, one of the biggest mergers has been American Airlines and U.S. Airways. Final steps of the 2010 merger, such as a single reservation system and consolidating frequent flyer programs, are still not complete because of the size of this operation.

Acquisition

In an acquisition, usually one business purchases all or part of another business. As in a merger, most acquisitions involve lengthy negotiations, due diligence, and portfolio transfers. In addition, sellers are generally required to provide information about its’ or their finances, personnel, business opportunities, marketing practices, insurance, and legal status.

Acquisitions are unique and fact-specific.  For example, a seller may finance part of the sale in one transaction, or complete an acquisition using a transfer of stock or cash or both.

Examples of major acquisitions just this year include AT&T’s $69.8 billion purchase of DirectTV and Comcast’s $45 billion acquisition of Time Warner Cable.

If you are considering an acquisition or merger it is always best to consult with an attorney who can help find the most advantageous transaction in light of all the factors and issues in your particular case.

Ezer Williamson Law provides a wide range of both transactional and litigation services to individuals and businesses. We have successfully prosecuted and defended various types of business and property claims. Contact us at (310) 277-7747 to see how we can help you with your business law concerns.

Protecting Your Business from Defamation

Consumer review based websites like Yelp have grown in popularity and power. Consumer voices are often trusted, and a bad online review can have costly consequences. However, online anonymity has led to abuse, and if someone has posted an online review about your business that is false there may be legal recourse for your injuries.

Defamation is an action brought to defend reputation. It involves intentional publication of false, defamatory, and unprivileged information that has a tendency to injure or cause special damage.

One recent case involving defamation claims, mLogica, Inc., et al., v. Pankaj Karan, CA Super. Ct. No. 30-2010-00342873 (December 30, 2013), shows how defamation for online activity works.  Two companies entered into a contract for the creation of some custom software. The party purchasing the software posted numerous negative reviews about the other company on its blog, and emailed its business partners and customers alleging that the software was delivered late and that the company employees were “swindlers” who “milked many of their clients of money and time.” The emails were very damaging to the company’s reputation in the industry, caused many projects to be cut, and a resulted in a significant loss of income.

While truth is an insurmountable defense in defamation actions,  the software company was able to show at trial that the software was fully functional and delivered on time. Furthermore, at trial, the defendant could not identify one unpaid vendor or defrauded customer.

A jury in Orange County, California awarded $1.23 million  to the software company for the damage to its reputation. The decision and verdict were affirmed on appeal.  In fact, the appellate court believed that the evidence supported damages of  “about $10 million. Maybe more.”

This case shows that there is a balance between preventing people from being critical on the Internet, and limiting false speech that does not promote the “marketplace of ideas.”

Ezer Williamson Law provides a wide range of both transactional and litigation services to individuals and businesses. Contact us at (310) 277-7747 to see how we can help you with any business dispute concerns you may have.