Steps in a Merger

There are three major steps in a merger transaction: planning, resolution, implementation.
1. Planning, the most complex part of the merger process, entails the analysis, the action plan, and the
negotiations between the parties involved. The planning stage may last any length of time, but once it is
complete, the merger process is well on the way.
More in detail, the planning stage also includes:

 signing of the letter of intent;

 the appointing of advisors who play the role of consultants, examining the strengths, weaknesses,
opportunities, and threats of the merger;
 detailing the timetable (deadline), conditions (share exchange ratio), and type of transaction (merger
by integration or through the formation of a new company);
 expert report on the consistency of the share exchange ratio, for all of the companies involved.

2. The resolution is simply management's approval first, then by the shareholders involved in the merger
plan.
The resolution stage also includes:

 the Board of Directors calling an extraordinary shareholders’ meeting whose item on the agenda is the
merger proposal;
 the extraordinary shareholders’ meeting being called to pass a resolution on the item on the agenda;
 any opposition to the merger by creditors and bondholders within 60 days of the resolution;

3. Implementation is the final stage of the merger process, including enrolment of the merger deed in the
Company Register.
Normally medium-sized/big mergers require one year from the start-up of negotiations to the closing of the
transaction. This is because, in addition to the time needed technically, there are problems relating to the
share exchange ratio between the merging companies which is rarely accepted by the parties without
drawn-out negotiations.
During the merger process, share prices will adjust to the share exchange ratio. On the effective date of the
merger, financial intermediaries will enter the new shares with the new quantities in the dossiers. The
shareholders may trade without constraint the new shares and benefit from all rights (dividends, voting
rights).

The ABC management could starts with the objective of merger, and address a few questions as:

1. Does the merger make strategic sense to ABC given its current business operations?
2. What is the worth of XYZ and other acquisitions offer at table?
3. What are the likely risks as different culture?
4. Does it add shareholders value?

So, to address these issues company ABC could form a committee with top management and cross-
functional team. Make detailed timeline, state the clear terms and conditions, examine the positives
and negatives repercussions of deal, financial projections. Prepare a detailed report on this.

Second stage involve presenting it to Board and shareholders of ABC. Share the likely positive
benefit the company derives from the merger. Get the shareholders on board. Resolve the conflicts
or doubts.
Finally, prepare the legal framework and structure of the deal merging XYZ. Take it to government
authorities for approvals under the acts. Implement the merger and enter the new shares.