M&A: When the financial gloves come off

If you want to know how mergers and acquisitions work, you’d best ask a lawyer. Because there are legions of them involved in any M&A deal (as mergers and acquisitions are known).

We hear from two lawyers with extensive experience in M&A, as well as other aspects of corporate law and equity financing, about exactly how mergers and acquisitions work.

Alexandra Slack, senior legal counsel at the European Investment Fund, and her European Investment Bank colleague Tom Nguyen take us through the story of M&A from the 1980s, when the field was so wild, hostile and controversial that it prompted a best-selling book called “Barbarians at the Gate,” through to more recent moves toward a less confrontational style of merger. On the way, Tom namechecks Gordon Gecko. Of course.

“From the legal perspective, a merger is when one company absorbs another and therefore becomes one entity,” says Alexandra. “In an acquisition, one company takes a majority stake in another and the two companies continue to exist.”

For fans of financial definitions (and this is A Dictionary of Finance, after all), Tom and Alexandra explain various terms, including:

Squeeze out, which allows an acquirer to buy the whole company, once a certain percentage of the shareholders accept its offer. This is a way of dealing with a dead register.

A dead register refers to shareholders who have changed address, for example, but haven’t informed the company, so they don’t respond to an offer to buy their shares by another company.

If there are terms or concepts you would like us to explore, give us a shout on Twitter (@EIBMatt or @AllarTankler). Or just send us a picture of you with your hair gelled like Gordon Gecko.

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