Mergers and acquisitions are transactions in which a company’s ownership is exchanged or combined with another firm. Businesses may seek to combine with a larger, more established organization to safeguard their long-term viability. The concept of mergers and acquisitions is prevalent in the lending industry as larger lending businesses may acquire a competition or even a smaller company with growth prospects to improve its competitive edge or expand its own business.
There are majorly three means of acquiring another lending business with your own: buying the company’s assets, buying out of the business’s stock, and a direct merger of the two firms. As a lending business looking to merge with another or engage in the complete acquisition of another lending business, several factors must be considered before embarking on such. Some of those factors are;
- Preliminary Agreements: Ensure all forms of initial agreements before the merger process is well documented, scrutinized, and recorded. Examples include; the term sheet, confidentiality agreement, exclusivity agreement.
- Due Diligence: It is essential to know the value of the firm you are merging with or acquiring before proceeding. Understand the particular assets and liabilities owned by the business and plan how to integrate operations moving forward.
- The Agreement: Carefully document and review the terms and conditions of the merger or acquisition. Examples of agreement in a merger or acquisition are; merger agreement, stock purchase agreement, and asset purchase agreement.
- Closing: Ensure that all relevant documents are delivered and executed with a smooth transition plan.
To learn more about mergers and acquisitions in the lending industry, click here.
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