California Business, Insurance And Environmental Law Blog

Many entrepreneurs in California attempt to use investment capital in an effort to scale up their companies. Typically, a startup company will go through multiple funding rounds to meet its capital needs. In exchange for funding, investors will receive an equity stake in the business. It can take anywhere from three to nine months to complete a funding round, and later rounds generally take longer to complete because of increased due diligence.

During the funding process, business owners will need to organize company data and research potential investors. From there, an entrepreneur will create a pitch deck and execute that pitch at investor meetings. If there is interest in doing a deal, a preliminary offer will be made pending the due diligence process. When an investor is satisfied with what he or she has seen, money will be transferred to the company through a wire transfer.

Companies doing business in California or any other state may feel that a merger is in their best interests. In a vertical merger, a supplier will merge with one of the businesses that it supplies products to. A horizontal merger involves competing companies in the same field coming together to create a larger and potentially stronger entity. In some cases, a horizontal merger is hostile in nature, which means that one organization forcefully takes over the other.

Market extension mergers are similar to a horizontal merger. This occurs when a company that does business in one part of the country or world merges with a company that does business elsewhere. By combining forces, the new entity has access to a larger market and may be more efficient overall. In some cases, two businesses may come together that were not in direct competition with each other.

Two companies are publicly sparring over a merger that could affect rent-to-own consumers in California and across the country. Rent-A-Center, which specializes in rent-to-own sales of household goods and products like electronics and furniture, said that it terminated its agreement to merge with Vintage Capital Management, a private equity firm that also owns one of its major competitors in the market. Earlier, the merger had been approved by a decisive vote of Rent-A-Center shareholders in September 2018.

In response, the equity firm said that Rent-A-Center's actions were invalid, breaching the contract between the companies. Vintage said that the merger agreement remains valid and that it intends to take action to make sure it proceeds. These statements came after the Federal Trade Commission presented both companies with a second request for more information to investigate the antitrust impact of the acquisition. However, Rent-A-Center said that it would not extend the end date of the agreement to accommodate the FTC request, saying that the company had the right to end the agreement. It also asked for $126.5 million from Vintage as a penalty.

The large amounts of money involved in a business merger mean that emotions will be running high, a lot will be on the table and there's the risk of making a huge mistake that haunts you for many years to come. For these and many other reasons, hiring an intermediary to help navigate the various moving parts involved with a large business merger is a wise move.

Whoever you choose as a prospective intermediary, you will want to interview this person to ensure he or she is the right one for the job. Here are the first question you should ask regarding the intermediary's experience, education and qualifications: