Merger Structuring

Introduction: What is Merger Structuring?

Merger structuring is a complex legal and financial process aimed at combining two or more independent companies in the most efficient, secure, and profitable way. In Georgia, where the business environment is dynamically evolving, Mergers and Acquisitions (M&A) are key instruments for growth, consolidating market positions, and optimizing resources. However, without choosing the right structure, a merger can turn into a bureaucratic nightmare, trigger unforeseen tax liabilities, or be blocked by regulatory bodies. Merger structuring involves selecting a deal model (e.g., share purchase, asset purchase, or statutory reorganization) that minimizes risks and maximizes synergy.

What Does This Service Cover?

Merger structuring includes full legal support from inception to deal closing:

• Legal Due Diligence: Detailed examination of the target company to uncover hidden liabilities, litigation, and contractual risks.
• Deal Model Selection: Analyzing which form is better: Merger (acquisition or consolidation), Share Deal, or Asset Deal.
• Tax Planning: Analyzing the tax effects of the merger operation (e.g., VAT, corporate profit tax) and finding optimal pathways.
• Drafting Merger Plan: Creating a detailed document defining share exchange ratios, reorganization timelines, and conditions.
• Regulatory Relations: Preparing notifications for the Competition Agency (regarding concentration) and obtaining clearance.
• Transaction Documentation: Drafting SPAs (Share Purchase Agreements), SHAs (Shareholders' Agreements), and minutes of reorganization meetings.

Common Real-World Scenarios

Merger structuring is essential in various business scenarios:

• Competitor Acquisition (Horizontal Merger): When a company buys a competitor to increase market share. Compliance with competition law is critical here.
• Supply Chain Control (Vertical Merger): A manufacturer acquires a distributor or raw material supplier.
• Intra-Group Reorganization: A holding company wants to merge several subsidiaries to reduce administrative costs.
• International M&A: A foreign corporation buys a Georgian company, requiring harmonization of Georgian law with international standards.
• Distressed M&A: Acquiring a financially troubled company, where managing creditor claims is paramount.

Georgian Legal Framework

The merger process is regulated by the Law of Georgia on Entrepreneurs, which details the stages of reorganization: publishing the merger plan, informing creditors, and their rights. The Law on Competition establishes an obligation for companies with certain turnovers to agree on mergers with the Competition Agency in advance to prevent abuse of dominant market positions. The Tax Code of Georgia regulates the taxation of asset transfers during reorganization (in many cases, these operations are exempt from VAT and profit tax if specific conditions are met).

Service Process

Merger structuring involves several stages:

1. Strategic Planning: Defining goals and choosing the structure (acquisition vs consolidation).
2. Due Diligence: Legal and financial audit of the target company.
3. Document Preparation: Drafting the merger plan and agreements.
4. Corporate Approval: Holding partner meetings and adopting resolutions.
5. Registration and Publication: Registering with the Public Registry and making information public for creditors.
6. Closing: Final registration and asset transfer.

Why Use Legal.ge?

A merger isn't just a signature; it's a complex process where a single mistake (e.g., failing to notify the Competition Agency) can lead to heavy fines and deal cancellation. On Legal.ge, you will find M&A experts with experience managing both local and cross-border transactions. We help you turn a complicated process into a successful business opportunity.