Corporate mergers and acquisitions can vary considerably in the time they take to be completed. This length of time may span from six months to several years.
There are a number of individual steps that need to be successfully completed by two public companies before they are legally combined into a single entity. Companies usually work with an investment bank to manage the merger process including approvals, documentation, and implementation.
The entire process officially starts with an offer made by one company to another. Offers may be public or private. If a considerable offer is made then both companies will usually be involved in closed-door discussions about the proposed merger. Agreements may be made after the first offer but usually, negotiations will involve several offers and continued discussions that may last for months.
Once an agreement between two companies is reached, both companies will make official announcements of the agreed upon merger proposal. The final details of a merger proposal are specified in corporate communications and distributed to the shareholders of both companies. Announcements and communications of a merger also include details of a shareholders’ vote which typically occurs at either a special meeting or the company’s annual shareholder meeting. Assuming the required votes are obtained from both sides, the merger then moves to the regulatory approval phase.
In many cases, amiable merger offers usually move somewhat quickly through the corporate communication phase but may be slowed for months or years in the regulatory approval phase. Generally, the amount of time required for regulatory approval will depend on the scope and size of a company’s operations.
Companies that operate in multiple geographies must obtain regulatory approval from each nation’s government. The more countries of operation the longer and more tedious this process can be. Domestically in the U.S., government regulators will closely scrutinize the competitive aspects of the merger in addition to the operational variables. In some cases, companies may be required to integrate certain provisions mandated by the government before approval can be achieved. This can include divestitures in certain areas of combined businesses where monopolistic attributes may be identified.
The Bottom Line
As companies go through the merger process, the merger timeline is often an important headline of communication. Executives will typically discuss merger details and field ongoing questions from analysts in quarterly earnings reports. Checkpoints, deadlines, and timelines can all be revised as the process is ongoing. As mentioned, regulatory due diligence across the globe for worldwide conglomerates can turn up any number of idiosyncrasies that may lengthen the time to full approval.
In general, synergies are typically expected from a corporate merger which results from the combination of key business areas and the reduction of costs. These combinations and synergies are what create the greatest need for corporate analysis and deep due diligence. The different variables involved in each individual merger scenario are also the driving factors in the total amount of time it takes for a merger to be completed from introduction to final comprehensive approval. The Corporate Finance Institute estimates a wide range of six months to several years for a merger completion. In some instances, it may take only a few months to phase through the entire merger process. However, if there are a broad range of variables and approval hurdles, the merger process can be elongated to several years.