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Mergers continue apace, but spinoffs also on the rise

A merger usually occurs when two companies believe they can operate more efficiently and profitably by combining their resources. Mergers often take the form of corporate acquisitions in which one company purchases another company. These acquisitions can take the form of either asset purchase agreements or stock purchase agreements. In an acquisition the purchasing company typically retains its corporate name and identity, while the acquired company no longer exists as a separate entity.

Detroit businesspeople may already know that this year has been a busy one for corporate mergers nationwide. According to S&P, however, another trend is emerging. Many companies are choosing to break up because that is proving to be more profitable. The business strategy driving this trend appears to be that the parts are more valuable than the whole. S&P indicates that spinoff activity so far this year is 30 percent higher than in all of last year.

The spinoff trend includes some of the country's biggest companies. Symantec and Hewlett-Packard recently announced that they will be splitting their companies in two. eBay is also in on the trend, and recently disclosed it will be spinning off its PayPal business. In some cases the spinoffs represent the undoing of mergers that took place within the last decade.

Business owners and managers considering mergers, acquisitions or spinoffs must consider a number of issues before committing to a course of action. There are legal and regulatory requirements that must be satisfied in most cases. Speaking with an experienced Detroit corporate transactions attorney can help decision makers clearly evaluate their options and make sure the deal gets concluded properly.

Source: The New Yorker, "Le Divorce," James Surowiecki, November 3, 2014

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