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Business leaders know very well that, to remain competitive, any business needs to innovate and be able to face the competition. In order to gain access to, among other things, new markets or to be able to serve a larger number of customers, more and more companies are resorting to mergers and acquisitions, notably to create larger and more effective entities.
Although mergers and acquisitions both lead to major changes within companies, they each have their own impacts. In the case of a merger, two or more companies or business corporations will join forces to form a single entity. To the contrary, in the case of an acquisition, one company will simply buy out another one, and each company will preserve its integrity and existence.
A merger or an acquisition may have very interesting financial benefits. Whether it’s a decrease in operating costs resulting from grouping distribution systems, for example, a significant increase in economic activity or yet a more rapid development of technologies, mergers and acquisitions are often essential to keep companies prosperous and competitive. Tax advantages are also to be considered in the case of a merger seeing as the Income Tax Act¹ grants several such advantages. For example, it provides that the tax year of predecessor corporations is deemed to have ended immediately before the merger. Furthermore, the shareholders who owned shares of the share capital of one of the predecessor corporations are, pursuant to certain conditions, deemed to have disposed of their old shares immediately before the merger for proceeds equal to the total of the adjusted cost bases² and to have purchased the new shares at an equal cost³.
However, the major changes that result from the merger or the acquisition require professional guidance that the Bernier Fournier team is able to provide to you, whether you are seeking to acquire or sell a new company. Mergers and acquisitions come with risks which need to be analyzed and mitigated. A qualified team such as ours has knowledge and understanding not only of the legal aspects of the transaction, but also its financial and fiscal aspects, and will see to properly managed the risks involved. For example, our team will see to it that the transaction is advantageous by conducting prior due diligence. We will also ensure that confidentiality is protected during the negotiations to prevent any and all risk of prejudice to your corporate image should negotiations break down. Given that the negotiation and drafting of the contract will also be crucial to reaching an agreement, our team shall assist you in making sure that your contract is adapted to the objectives of your future company or yet to your future goals with respect to sales.
A corporate transformation of this scope will also require a totally new structure that meets your expectations, and that is why the Bernier Fournier team will also advise you regarding the restructuring of your company. A proper restructuring will enable you to maintain good working relationships—a key to the growth of any company—in addition to avoiding any workplace disputes. However, the restructuring effort does not stop there; 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 company is local, national or even international in scope, the Bernier Fournier team is qualified to provide you with support throughout this major process. If you are contemplating a merger or an acquisition, contact our team to make sure that your business sale or purchase goes through trouble free and without unpleasant surprises.
¹ Income Tax Act, R.S.C. 1985, c. 1, (5th Supp.), s. 87(2)(a).
² Idem, s. 87(4)(a).
³ Idem, s. 87(4)(c)(i).