The goal of a merger between two firms should be to strengthen either one of them, or indeed both of them. However the risk of finding bad partners can cause a weakening of both with inevitable consequences for their financial situation.

Once again, Greenberg, Hornblower, Deschenaux & Partners can guide your company through this difficult terrain, and bring the process to a satisfactory conclusion.


What are the strengths and the weaknesses of a company?

What are the advantages of acquiring or partnering with a particular firm?


What are the compatibilities and incompatibilities of the two partners in a merger?


Greenberg, Hornblower, Deschenaux & Partners has experience in helping a company purchase assets from a bankrupt company without problems. This is an area where Greenberg, Hornblower, Deschenaux & Partners can help you, and make all the difference to your firm.


What are the inherent risks of a merger or acquisition operation, all factors taken into account?

What problems are likely to arise?


How much will a merger or acquisition cost?

And what are the cost savings, or future costs?


What impact will the merger or acquisition have on the functioning of your company, and what impact will a partnering strategy have on your partner?

How will the decision making process change?

And how will the capital structure be altered following the merger?


Greenberg, Hornblower, Deschenaux & Partners can create a new business structure with the partners and even serve as referee in cases where the mutual interests of the partners diverge, for example, in areas relating to corporate decision making, whether operational or otherwise.


In continental Europe, with the exception of the Netherlands, a merger is usually undertaken by a single legal operation which consists of: the dissolution of the acquired company; the automatic transfer of all operations (both past and present which includes all assets and liabilities) of that company to the acquiring company; and the exchange of shares of the acquired company with the shares of the acquiring company. Usually, to discuss the transaction an extraordinary general shareholders’ meeting is convened, which votes on this matter, and discusses merger terms. Hence, shareholders of the acquired company become shareholders of the acquiring company (without any dissenting shareholder rights to opt out of the transaction).

In the United States, where this type of merger is also used, dissenting shareholders have the choice to withdraw from this action by having their shares repurchased. The creditors of the acquired company, obliged to change their debtor, are also protected by a system of sureties allowing them a right of recourse against the merger. The process of harmonization in legal norms across the European Union is also moving European law in this direction.

Other methods exist by which companies can agree to act together for their mutual advantage. For example, a commonly used method is to take out cross-shareholding in two or more companies. This has been taken one stage further in Germany where the law permits the creation of dependence contracts between companies. Cross-shareholdings are usually governed by conventions, either between the principal shareholders through a voting trust, or through a convention relating to voting rights of shareholders. It is important to recognize that these agreements are not permitted in some jurisdictions.

A private company which would like its shares to be quoted publicly can also achieve this goal by merging with a quoted company (the Acquired Company).


Reduced Costs: There are no specific costs associated with registering for a specific stock market, as these costs have already been incurred by the Acquired Company.

Speed of Execution: This process is limited to undertaking the necessary formalities of a merger, which are to have the necessary extraordinary general shareholders meetings, the creation of a new business entity, the dissolution of the acquired business, and the drafting and publication of documents governing the operation of the new business. The time required to undertake this operation is essentially that required to find a company willing to negotiate a merger.

Creation of a “currency”: The quoted shares of a company following the merger have exactly the same

legal consequences of a company issuing shares following its own quotation.


Absence of new funds: This financial operation does not entail raising any new funds; to the contrary, it will reduce the assets because of the costs of the transaction.

Loss of control: A merger of two companies necessitates a dilution of capital which can bring about a lessening of control of the company, or in some cases a complete loss of control.


This type of operation also has the fundamental objective of putting a private company on the stock market.

Here a private company merges with a quoted company which does not have any revenue or operations. Very often these are called “empty shells”. The private company obtains the majority of the shares in the shell and takes control of its board of directors. Usually the quoted company then changes its name and uses that of the previously private company.


The advantages of this reverse merger are the same as those of the traditional merger with the following provisos:

Reduced cost.

Speed of Execution: The time required for this operation is generally shorter than for a normal merger (assuming one can find a “clean” empty shell and the private company has an established track record). Significant checks should be carried out to verify that the shell does not have outstanding liabilities from previous operations.

Creation of a “currency”.

No loss of control: Reverse mergers allow existing shareholders to avoid the inconvenience of diluting their control over the company, since one company takes complete control of another.

Absence of new funds: As in the traditional merger, there is no new raising of capital, and therefore to persuade the shareholders of the acquired company to accept the deal, it is necessary that the private company has an extremely attractive business plan, to offset the loss of their control.

A lot of trouble: generally institutional investors and other actors on the markets refuse to deal with these types of companies, since there are too many risks associated with them. It is because of this that Greenberg, Hornblower, Deschenaux & Partners advises against these types of operations, and only undertake them in exceptional circumstances, the description of which is out of the scope of this brochure.


The first stage of a merger is the coming together of two or more private companies so as to constitute an Issuer likely to interest the capital markets. Without the interest of the markets, no funds will be raised. Greenberg, Hornblower, Deschenaux & Partners understands the delicate nature of this operation and has the ability to bring about a satisfactory conclusion because of its knowledge of the capital markets, its understanding of the interests of the key actors, and its familiarity with the Entrepreneur.

GHD LLP (155)

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