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Usually these occur in a friendly setting where officers in each company involved come together to go through a due diligence process to ensure a successful marriage between all the parties involved.
On other occasions, acquisitions can happen through hostile takeover via absorbing the majority of outstanding shares in the open stock market. In the United States, business laws vary from state to state, some companies have limited protection against hostile takeover. See Delaware corporations.
Various methods of financing an M&A deal exist:
No effective marketplace currently exists for the mergers and acquisitions of privately-owned small to mid-sized companies. Market participants often wish to maintain a level of secrecy about their efforts to buy or sell such companies. Their concern for secrecy usually arises from the possible negative reactions a company's employees, bankers, suppliers, customers and others might have if the effort or interest to seek a transaction were to become known. This need for secrecy has thus far thwarted the emergence of a public forum or marketplace to serve as a clearinghouse for this large volume of business.
At present, the process by which a company is bought or sold can prove difficult, slow, and expensive. A transaction typically requires six to nine months and involves many steps. Locating parties with whom to conduct a transaction forms one step in the overall process and perhaps the most difficult one. Qualified and interested buyers of multimillion dollar corporations are hard to find. Even more difficulties attend bringing a number of potential buyers forward simultaneously during negotiations. Potential acquirers in industry simply cannot effectively "monitor" the economy at large for acquisition opportunities even though some may fit well within their company's operations or plans.
An industry of professional "middlemen" (known variously as intermediaries, business brokers, and investment bankers) exists to facilitate M&A transactions. These professionals do not provide their services cheaply and generally resort to previously-established personal contacts, direct-calling campaigns, and placing advertisements in various media. In servicing their clients they attempt to create a one-time market for a one-time transaction. Many but not all transactions use intermediaries on one or both sides. Despite best intentions, intermediaries can operate inefficiently because of the slow and limiting nature of having to rely heavily on telephone communications. Many phone calls fail to contact with the intended party. Busy executives tend to be impatient when dealing with sales calls concerning opportunities in which they have no interest. These marketing problems typify any private negotiated markets.
The market inefficiencies can prove detrimental for this important sector of the economy. Beyond the intermediaries' high fees, the current process for mergers and acquisitions has the effect of causing private companies to sell at a significant discount relative to what the same company might sell for were it publicly owned and traded on a functioning exchangeA stock exchange is an organization of brokers and investment bankers which has the purpose of providing the facilities for trade of company stocks and other financial instruments. Usually there is a central location at least for recordkeeping, but trade. An important and large sector of the entire economy is held back by the difficulty in conducting corporate M&A (and also in raising equityFor the actors' guilds called "equity," see Actors' Equity Association (U. or British Actors' Equity Association (U. For "equity" as the value of an ownership interest in property, see ownership equity. Equity is the name given to the whole area of the le or debtDebt is that which is owed. A person who owes debt is called a debtor . People or organisations often enter into agreements to borrow something. Both parties must agree on some standard of deferred payment, most usually a sum of money denominated as units capital). Furthermore, it is likely that since privately-held companies are so difficult to sell they are not sold as often as they might or should be.
Previous attempts to streamline the M&A process through computers have failed to succeed on a large scale because they have provided mere " bulletin boardOffice bulletin board A bulletin board is a place where people can leave public messages, for example, to advertise things to buy or sell, announce events, or provide information. Bulletin boards are often made of a material such as cork to facilitate adds" - static information that advertises one firm's opportunities. Users must still seek other sources for opportunities just as if the bulletin board were not electronic. A "multiple listings service" concept has not been applicable to M&A due to the need for confidentiality. Consequently, there is a need for a method and apparatus for efficiently executing M&A transactions without compromising the confidentiality of parties involved and without the unauthorized release of information.
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