SEC Form S-4 Definition

What Is SEC Form S-4?

SEC Form S-4: Registration Statement Under the Securities Act of 1933 must be submitted to the Securities and Exchange Commission (SEC) in the event of a merger or an acquisition between two companies. The form must also be submitted for exchange offers.

Form S-4 has two parts. Part I is the prospectus or proxy statement involved. Part II contains supplemental information that can include expenses issued, private placements of securities, and additional tax information.

Understanding Form S-4

A publicly-traded company registering any material information related to a merger or acquisition or companies undergoing an exchange offer will file Form S-4. An exchange offer occurs when a company or a financial institution offers to exchange securities that it provides for similar securities at less demanding terms. This is often done in an attempt to avoid bankruptcy.

Investors closely watch Form S-4 submissions in order to attempt to make quick gains from M&A activity, and can download a company's S-4 directly from the SEC.

Why Merge?

Mergers occur for a variety of reasons: they can help companies expand to new territories, unite common products or move into new segments, grow revenues, and increase profits—all in order to create shareholder value. After a merger, new company shares are distributed to existing shareholders of both original businesses.

Five common types of mergers include:

• Conglomerate: This occurs between two or more companies engaged in unrelated business activities (i.e., different industries and/or geographical regions). A mixed conglomerate takes place between organizations that are attempting to gain product or market extensions through the merger, such as the 1995 merger between The Walt Disney Company and the American Broadcasting Company (ABC).
• Congeneric: Two or more companies operate in the same market or sector with overlapping technology, marketing, production processes, or research and development (R&D). They join forces in this product extension merger, and a new product line from one company is added to an existing product line of the other company.
• Market extension: This occurs when companies sell the same products but compete in different markets. For example, WeWork merged with the Chinese co-working startup Naked Hub in 2018, which provides similar co-working services in Shanghai, Beijing, and Hong Kong. WeWork was seeking significant growth outside the U.S.
• Horizontal: This occurs between competitors operating in the same industry. The merger is typically part of a consolidation and is more common in industries with fewer firms. Horizontal mergers can create a single, larger business with greater market share.
• Vertical: When two companies that produce parts or services for a specific finished product merge. Typically, these two companies operate at different levels within the same industry's supply chain and can achieve cost reduction. A famous vertical merger was the 2000 combination of America Online (AOL) and media conglomerate Time Warner.

In all cases, participating firms must submit Form S-4 to the SEC to be sure the merger is legal.