Mergers & Acquisitions – Private Companies

M&A2014Mergers and acquisitions play a major role in many smaller, privately held companies.  For growth purposes, to address competitive pressures, advancements in technology, changes in your industry or economic conditions, privately-held companies acquire or merge with other companies in order to remain competitive, accelerate growth or to grow their business to the next level.  A private company may also sell to a larger private or public company for the same reasons.

Mergers and acquisitions also enable a private company to develop a competitive advantage by increasing their depth of management team, technology and intellectual property, flexibility, growth and shareholder value.  The most common reasons for a private company to acquire or merge are strategic growth, talent growth, entering a new geographic market or industry (buy vs. build) or preparation for an exit.  CEO Advisor has decades of experience in mergers and acquisitions of private companies. Gain the needed expertise to evaluate your options.

The following are different types of Private Company M&A Transactions:

A. Growth Transactions

  1. Stock
  2. Asset Acquisition
  3. Merger
  4. Small Acquisition for Talent
  5. Strategic Alliance
  6. Joint Venture
B. Ownership Change Transactions
  1. Minority Share Sale
  2. Venture Capital Equity Investment
  3. Leveraged Buyout
  4. Management Buyout
  5. ESOP (Employee Stock Ownership Plan)
  6. Stock Repurchase
  7. Hostile Takeover
  8. Initial Public Offering
Growth Transactions
We will focus primarily on growth related transactions in this article.
There are several reasons why private companies choose to expand through growth transactions rather than internally or organically.  First of all, growth transactions happen much faster, virtually overnight in some cases, whereas organic growth takes time as sales grow.  A privately held company’s goal may be to eliminate a competitor, enter a new industry or geographic market, introduce a new product line, acquire key technology, products or services, or bring on the talent and management team that results from a growth transaction.

Expansion can be accomplished through mergers, asset acquisitions, tender offers or joint ventures. The following methods can be used to help a private company grow without having to create a whole other business entity.

Acquisition – A private company acquisition is when a public or private company buys the stock of a private company. An acquisition may also be an “asset purchase”, where rather than buying the stock, the buyer simply buys the entirety or a portion of the assets of a private company. The assets may be tangible such as customers, inventory and machinery, or intangible assets such as software, patents and trademarks. The selling private company may then continue as a smaller company or dissolve after the sale.
Merger – A private company merger is when two or more private companies combine to form a single entity under a consolidated management and ownership. A merger can take place through an amalgamation or absorption.
  • Amalgamation – An amalgamation is when two or more private companies enter into the merger agreement to form a completely new entity. In this type of merger, both private companies lose their identity and a new private company is formed to manage the consolidated assets. Amalgamation tends to occur when both private companies are of equal size.
  • Absorption – Absorption is when the merger occurs between two entities of a dissimilar size. In such case, the larger private company absorbs the smaller one. The merger dissolves the smaller private company and places all its assets in control of the larger private company.

Talent Acquisition – An acquisition-by-hire may occur especially when the target private company is quite small or is in the startup phase. In this case, the acquiring company simply hires the staff of the target private company, thereby acquiring its talent (if that is its main asset). The target private company simply dissolves and few legal issues are involved.

Strategic Alliance – A strategic alliance can range from a large distributor or reseller marketing and selling your products to a larger alliance with financial backing or special terms.

Joint Venture – A joint venture is when two or more private companies enter into an agreement to allot a portion of resources towards the achievement of a particular goal over a designated period of time. Synergies occur when businesses capitalize on joint opportunities or other combined efforts to obtain greater results than working alone, whether it is increased revenue or decreased costs.

At CEO Advisor, Inc., we have the expertise to guide your company through the many steps involved in a merger or acquisition. Contact Mark Hartsell, MBA, CEO of CEO Advisor, Inc. today to discuss your growth needs at (949) 629-2520, by email at or visit for more information.

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