Opinion

Merging for acquisition

February 06, 2024
Merging for acquisition

Majed Garoub

Business activities are now facing some difficulties due to a lack of logistics, finance, and others, which are bringing businesses to a standstill. This de facto situation puts some businesses on the verge of collapse. This urgently requires brave and positive actions to maintain the status quo of many entities.

Joining hands to work together could open a room for survival. Consolidation and amalgamation of companies is a possible good opportunity. As a rule, this could take place either by the process of acquisition or otherwise by merger. There were good examples of acquisitions in middle-size companies, as legally approved by the regulators and without affecting the trading rules governing fair competition.

Consolidation by acquisition shall be effective by applying certain formalities. For effective consolidation, a company shall first adopt a resolution that approves its dissolution and accordingly its non-existence as a legal entity. This is required to pave the way for the new company to be incorporated.

The company, to take part in the consolidation process, shall take all necessary steps for the valuation of its net assets according to the provisions stipulated in the law and to be followed in cases regarding the valuation of shares in kind.

Certain legal procedures should be followed before the intended consolidation takes place. Normally the consolidation process takes time and the two concerned companies should discuss in detail all matters regarding the goodwill of each company, all issues related to the assets and liabilities of each company, the new business name or logo to be adopted by the new company and the names of persons who are going to manage the new company.

All such issues should be discussed in detail and agreed upon before the final declaration of the “new” consolidation. However, this process requires careful legal consultation to follow the right track.


February 06, 2024
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