Investment Banking Tutorials
- Investment Banking Free Course
- Investment Banking Basics
- What is Investment Banking? (Overview of what do they actually do!)
- Investment Banking vs Commercial Banking
- Equity Research in an Investment Bank
- What is Asset Management Company AMC
- Sales and Trading in Investment Banking
- Private Placement, IPO and FPO in Investment Banking
- Investment Banking – Underwriters and Market Makers
- Investment Banking – Mergers and Acquisitions
- Investment Banking – Restructuring and Reorganisation
- Investment Banking Roles and Responsibilities
- Market Makers
- Propreitary Trading
- Top 4 Must Know Investment Banking Charts (Free Download Template included)
- Pitch Book | Guide to Investment Banking Pitch Book (Examples)
- Leverage buyout Lbo Analysis
- Trading Floor
- Market Order vs Limit Order
- Merchant Bank
- Best Investment Banking Books
- Nasdaq vs Dow Jones
- Nasdaq vs Nyse
- Investment Banking Careers
- Investment Banking Interview Questions (with Answers)
- How to get into Investment Banking?
- Investment Banking Job Description
- Investment Banking Associate Salary
- Investment Banking Job For Graduates (Engineers) | Top 8 Tips
- How to get an Investment Banking Internship?
- Top 10 Finance Certifications Programs
- Investment Banking Lifestyle
- Investment Banking Exit Opportunities
- Investment Banking Case Studies
- Top 10 Best Finance courses (with Online Certification)
- Investor Relation Job Description
- Financial Analyst Job Description
- Investment Banking vs Equity Research
- Investment Banking vs Asset Management
- Commercial Banking vs Merchant Banking
- Investment Banking vs Corporate Banking
- Portfolio Management vs Investment Banking
- Investment Banking vs Hedge Fund Manager
- Investment Banking vs Investment Management
- Investment Banking vs Private Equity
- Careers in Trading
- Investment Banking Firms
- Top Bulge Bracket Investment Banks
- Top Middle Market Investment Banks
- Top Boutique Investment Banks
- Investment Banking in Dubai
- Investment Banking in Hong Kong
- Investment Banking in Russia
- Investment Banking in Brazil
- Investment Banking in China
- Investment Banking in Australia
- Investment Banking in Saudi Arabia
- Investment Banking in Singapore
- Investment Banking in London (UK)
- Investment Banking in India
- Investment Banking in Ireland
- Investment Banking in South Africa
- Investment Banking in Canada
- Investment Banking in Germany
- Investment Banking in France
- Investment Banking in Malaysia
- Investment Banking in Philippines
- Investment Banking in Boston
- Investment Banking in San Francisco
- Top Banks
- Top Banks in Australia
- Top Banks In Austria
- Top Banks In Bahrain
- Top Banks In Belgium
- Top Banks In Bermuda
- Top Banks In British Virgin Islands
- Top Banks In Brunei
- Top Banks In Canada
- Top Banks In Cayman Islands
- Top Banks In Denmark
- Top Banks In Finland
- Top Banks In France
- Top Banks In Germany
- Top Banks In Greenland
- Top Banks In Guernsey
- Top Banks In Ireland
- Top Banks In Isle of Man
- Top Banks In Japan
- Top Banks In Kuwait
- Top Banks In Liechtenstein
- Top Banks In Luxembourg
- Top Banks In Macau
- Top Banks In Norway
- Top Banks In Oman
- Top Banks in Pakistan
- Top Banks in Philippines
- Top Banks In Puerto Rico
- Top Banks In Qatar
- Top Banks In Saudi Arabia
- Top Banks In Singapore
- Top Banks In South Korea
- Top Banks In Sweden
- Top Banks In Switzerland
- Top Banks in UAE
- Top Banks in United Kingdom
- Top Banks in USA
- Mergers and Acquisitions
- What is Mergers and Acquisitions?
- Mergers vs Acquisitions
- Synergy in M&A
- Successful Mergers and Acquisitions
- Financing Acquisitions
- Statutory Merger
- Joint Venture
- White Knight
- Hostile Takeover
- Golden Parachute
- Poison Pills
- What is Amalgamation?
- Spin off vs Split Off
- Forward Integration
- Backward Integration
- Best Mergers and Acquisitions Books
- What is Asset Restructuring?
What is Statutory Merger?
A statutory merger is a type of merger where one of the companies in the merger gets to keep its own legal entity even after the merger. For example, let’s say that Company A and Company B enters into a statutory merger. Now, as per the rules of such merger, one company of these two will keep its legal entity intact. And another will cease to exist. This type of merger is just like an acquisition. Where a company acquires another company and still the acquirer keeps its legal entity and the acquired one loses its identity.
However, a statutory merger is completely different than a statutory consolidation. In a statutory consolidation, when two companies are merging, they lose their own identities. And a new successor is being created that will represent a combined version of both of these entities. For example, if Company C and Company D come together into a statutory consolidation, Company C, and Company D both will lose their existence and new successor Company E will be born that will represent a combination of Company C and Company D.
In a statutory merger, the parties involved need to adhere to the corporate laws of the state and not doing so will be perceived as illegal. In a statutory merger, the company that retains its legal entity acquires all the assets and liabilities of another company. As a result, the other company becomes defunct completely under its original name.
But the question still remains – why go for a statutory merger?
Why Statutory Merger?
The above snapshot is a Statutory Merger example. TDC has offered $2.5 bn to buy TV Station Viasat and other entertainment assets from Sweden’s Modern Times Grop under a statutory merger, which would create a group having combined revenue of $5.2bn.
There are many reasons for which organizations consider such merger. Here are the few most important ones
- First of all, if an organization feels that going for such merger will benefit them financially, the organization will try to seek a partner that would be ready for such merger.
- Secondly, if an organization wants to improve the efficiencies of its business processes or improve its core competencies or to reduce costs, it can consider such merger.
- Thirdly, the most important reasons for which a company goes for such merger is to beat a close competitor in market share or core strengths.
If we think from the point of view of the company that would lose its identity, we would see that there are other reasons for which the company would merge with another bigger or better company. Here are few reasons –
- The company may feel that merging with another bigger company would benefit their shareholders than running the company on their own. Since the purpose of a business is to maximize the value of the shareholders, this can be a decent move.
- Secondly, the company may feel that by merging with another company, there would be little/almost no conflict of interest in operations (though, in most cases, it’s isn’t true).
Until and unless both parties agree to such merger, it can’t happen.
Now, let’s look at the legal requirements and procedures.
Legal Requirements and Procedures of a Statutory Merger
Here are the legal requirements of a statutory merger.
- Before the statutory mergers can happen, conditional laws for the mergers are set by the corporate law. And each party in the merger must adhere to the laws set by the corporate law.
- Secondly, it’s important that the board of directors of each company approve of the merger before it ever takes place.
- Thirdly, the most difficult part of the such merger is to take the approval of the shareholders of each company. The shareholders need to use their voting rights and approve the such merger before it can ever happen.
- Finally, when all approvals are taken, the final approval is given by the authorities. That’s why the whole process of the statutory merger is tedious and takes months and months of time, patience, and effort.
However, a shorter form of the statutory merger is possible too. It can happen between a parent company and its subsidiary. Before going for this shorter form of statutory merger, one should do its due diligence carefully and thoroughly.
There is another aspect that we need to pay heed to in case of such merger. It’s the objection of shareholders against an extraordinary transaction.
They can use their appraisal rights and demand that –
- The shares of the corporation should be appraised before the merger.
- Before the merger ever happens, the shareholder/s should be given the fair market value of the shares she/he/they own in the company.
In short, a statutory merger needs to adhere to the well-being of both of the parties, shareholders, and business.
Differences Between Statutory Merger and Statutory Consolidation
The basic differences between a statutory merger and a statutory consolidation are –
- In a statutory merger, one of the two parties retains its entity and another party merges into the other by losing its entity. In a statutory consolidation, when two parties come together, both of their legal entities cease to exist, and a new identity is created.
- In a merger, the assets and liabilities of the merging company (one that loses its identity after the merger) become the property of the acquiring company (one that retains its identity intact even after the merger). In a consolidation, the assets and liabilities of both of the companies become the assets and liabilities of the larger company that is formed after consolidation.
- In both merger and consolidation, the federal and state government can stop the process of merger or consolidation by using anti-trust laws if they find that by merger or consolidation, a company (new or old) gets an unfair advantage over others or can affect the market by becoming a monopoly.
This has been a guide to What is Statutory Merger? Here we discuss reasons for statutory mergers, its legal requirements and differences between the statutory merger and statutory consolidation. You may also have a look at these recommended M&A articles –