Business leaders know that to remain competitive, any business must innovate and deal with competition. To have access to new markets, among other things, or to be able to serve a larger clientele, more and more companies are resorting to mergers and acquisitions, in particular to create a whole new, more efficient entity.
While both bring big changes to a company, mergers and acquisitions differ in their effects. During a merger, two or more companies or corporations will come together to form a single entity. In contrast, during an acquisition, a company will simply acquire another, which will have the effect of preserving the integrity and existence of each.
The financial benefits from mergers and acquisitions can be very attractive. Whether it is the reduction of operating costs through the consolidation of systems such as distribution, a considerable increase in economic activity, or a more rapid development of technologies, mergers and acquisitions are often essential for a company to remain prosperous and competitive. Tax advantages are also to be considered in the case of a merger because the Income Tax Act¹ grants several advantages. For example, it provides that predecessor corporations are deemed to have a taxation year-end immediately before the amalgamation. In addition, shareholders who owned shares of the capital stock of one of the predecessor corporations are, under certain conditions, deemed to have disposed of their former shares immediately before the merger for an amount equal to the aggregate of the adjusted cost bases² and have acquired the new shares at an equal cost.³
However, the major changes brought about by a merger or acquisition require professional guidance that the Bernier Fournier team will be able to provide, both for the acquisition of a new company and for the sale of one. Corporate mergers and acquisitions involve risks, which must be analyzed and reduced. A qualified team such as ours will ensure good risk management, thanks to its knowledge and understanding not only of the legal aspects of the transaction, but also of its financial and tax aspects. For example, our team will ensure that the transaction is beneficial through prior due diligence. In addition, we will ensure that confidentiality is protected during the negotiations to avoid any risk of damage to the image of your company in the event of a breakdown in the talks. As the negotiation and drafting of the contract will also be crucial aspects in the conclusion of the agreement, our team will be able to support you so that your contract is adapted to the objectives of your future company or to your sale aspirations.
A transformation of this magnitude within your company will also require a brand-new structure that will meet your expectations, which is why the Bernier Fournier team will also be able to advise you on the restructuring of your company. Adequate restructuring makes it possible to maintain, among other things, good labor relations, which are key in the growth of a business, in addition to avoiding any workplace litigation. The structuring does not stop there, however, as it also extends to tax planning, which will be handled by our team to ensure the effectiveness of the new financial structure.
In conclusion, whether your business is local, national, or even international, the Bernier Fournier team is qualified to support you throughout this large-scale process. If you are thinking of going down this path, you can ensure a hassle-free sale or company acquisition without unpleasant surprises by contacting our team.
¹Income Tax Act, R.S.C. 1985, c. 1, (5th supp.) s. 87(2)(a).
²Id., art. 87 (4) a).
³Id., art. 87 (4) c) (i).