M&A is an acronym for the term “mergers and acquisitions,” which, succinctly put, refers to the purchase outside of the ordinary course of business of the assets or control of another person. M&A may be consummated through various means, including the direct transfer of assets and liabilities, an acquisition of stock or other ownership interests in a target company or a merger of a target company into a buyer (or, more typically, its subsidiary) by operation of law.
Principal parties (i.e., buyers and targets) to a transaction may, but rarely do, include individuals. It is more common for one corporation, limited liability company, partnership or other entity to engage in M&A transactions with another entity. The purchase price (otherwise referred to as the “consideration”) may be in the form of cash, buyer stock, other assets or some combination thereof, though cash is by far the most common, given that only publicly-listed companies are generally able to offer freely-tradeable securities.
Although venture capital (VC) transactions also usually involve the acquisition by one company of ownership interests in another company, unlike in the M&A context, VC transactions do not typically entail the sale of a majority of a target’s equity securities or otherwise involve a change of control of the target. As a result, there are significant differences between the process, documentation and effect of these two types of deals. VC and M&A transactions are thus considered distinct practice areas.
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