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What your NJ business can learn from merger of Facebook and WhatsApp

According to a recent report by Bloomberg Businessweek, acquisitions throughout the world have grown over 25 percent in the first quarter of 2014. This translates to $174 billion in takeovers, leading chief executive officers to claim that the improving economy makes future mergers and acquisitions even more likely.

Examples of popular merger and acquisition transactions provided within the article include:

  • Comcast’s purchase of Time Warner Cable for $45.2 billion
  • Facebook’s acquisition of WhatsApp for $19 billion
  • Sprint considering the future purchase of T-Mobile

Of these examples, the first merger is projected to be fairly successful for the businesses involved, the last is still in the consideration phase, and the purchase of WhatsApp by Facebook is receiving serious scrutiny.

More on purchase of WhatsApp by Facebook

Facebook’s decision to purchase WhatsApp has received serious scrutiny by financial professionals throughout the business world. This scrutiny is primary focused on the initial offer: $19 billion.

An article by Forbes notes the purchase price is in stark contrast to the revenues and earnings of the company. More specifically, the company receives at most $300 million in revenues. Though the disparity between the purchase price and value is significant, the move provides lessons for any business.

Two of the biggest takeaways include:

  • Relevancy. Businesses need to remain relevant to their customers in order to succeed. Although of key importance to tech company industries, this lesson also applies to other businesses. Any business that becomes irrelevant will struggle. Key examples include Staples and Blockbuster, with many predicting that Barnes & Noble may soon join them.
  • Quality. In the case of WhatsApp, it could be argued that the quality of the product outweighed any benefit to be gained by marketing. A separate report by Forbes noted that WhatsApp received minimal press coverage prior to discussion of this merger. In fact, the article went on to explain that WhatsApp had set aside no funds in a marketing budget.

These rules transcend state lines, but businesses that are considering a merger or acquisition should take state laws into consideration.

New Jersey merger and acquisition law

In New Jersey, the Business Corporation Act governs the way in which corporations merge. The Board of Directors of each corporation must approve a plan of merger, which is then submitted to the shareholders for approval. Once approved by the shareholders, a Certificate of Merger must be filed with the New Jersey Department of Treasury. Acquisitions structured as sales of capital stock or as asset sales have different sets of procedures to be followed. The technical nature of these requirements and procedures suggest that that those going through a merger and acquisition should seek legal assistance. The process is complex and requires compliance with a variety of laws. As a result, those considering a merger or acquisition should contact an experienced New Jersey merger and acquisition lawyer to discuss the transaction and better ensure that their rights are protected.

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