You know – your favourite bank or company suddenly merges with another and you don’t know whether to stay or move on. Companies resort to corporate transformation for strategic, economic and legislative reasons. It’s not just about mergers. Companies and cooperatives can undergo different types of transformations. Let’s take a closer look at the various company conversions.
Company conversions are governed by the Act on Conversions of Companies and Cooperatives. This Act on Conversions sets out the conditions for the conversion to be approved, the rights and obligations of the statutory bodies and the protection of creditors and minority shareholders. It is the protection of creditors in conversions that has been strengthened by the 2024 amendment. In the following lines we will give you an overview of the different types of company conversions.
The term merger is familiar to many people in the foodservice industry, when, for example, two types of Asian cuisine are combined to create a completely new concept. In fact, a merger is the combination of two or more entities into one, in our case two or more companies.
There are several reasons why companies decide to merge. First of all, they may want to increase their market power and market share. This is because when two companies merge, they secure a stronger market position and increase their competitiveness. They may also seek synergies and cost savings, for example. By merging, companies can optimise processes, which will both reduce administrative costs and increase efficiency. Sometimes the objective of a merger is to diversify the business. The merger allows both companies to expand their product or service portfolio, so the company reduces its dependence on one market segment. Finally, we should also mention access to new technologies and know-how. Because teaming up with a smarter or more powerful neighbour can often be more profitable than trying to achieve the same performance on its own.
The conversion of a company involves a large number of legal and administrative acts. You usually cannot do without professional consultation. Save yourself the time and trouble of arranging a merger, acquisition or division and entrust the process to us. We will make sure that everything goes smoothly and in accordance with the law.
There are two main forms of merger – amalgamation and amalgamation.
A merger by amalgamation means that one company is dissolved and its assets are transferred to the successor company. This means that the original company ceases to legally exist and all of its assets, liabilities, contracts and obligations are transferred to another entity, which then continues the business. The merger process is often used to consolidate a market or to gain a competitive advantage.
A merger means that two companies come together to form an entirely new, previously non-existent entity. In this case, neither of the original companies continues its legal existence and a completely new company is created, which takes over all the rights and obligations of the two previous companies. This type of merger is particularly common when two equal companies decide to create a new company with a common strategy and vision.
If companies want to proceed with a merger, they must draw up a project and obtain shareholder approval. No merger can be carried out without the approval of the general meeting.
The next step is to inform all creditors and employees about the merger . Since a merger like this affects every employee and may affect the claims of creditors, they must be informed of the process.
Once the merger has been approved by all parties, it needs to be registered in the commercial register. This is the step that officially confirms all legal changes and the merger takes effect.
The conversion of a company often serves the purpose of economic savings, tax optimisation, risk management or business restructuring, for example by spinning off unprofitable parts. Changing the legal form or creating holding structures for more efficient management also play an important role.
When a company is divided, its assets, liabilities and rights are divided among the newly created or existing companies. The division can create smaller and more specialised entities. Moreover, by separating the different parts of the business, the risks associated with their operation can be minimised, so that if one part of the company is threatened, the remaining parts remain safe thanks to the split. In addition, by splitting up the company, the company can separate the underperforming or problematic divisions and focus on the more profitable parts of its business.
The process of splitting up a company can take place in two ways.
In a spin-off, a portion of the company is separated and transferred to another existing or newly formed company. However, the original company is not dissolved and continues to operate. This method is often used when a company wants to spin off a certain part of its business (a specific division or operation).
In a demerger, the assets, rights and liabilities of the original company are divided among several successor companies. However, the original company is dissolved in this case. Demerger by merger occurs mainly in cases where entrepreneurs want to streamline the management of individual parts of the business and create separate entities.
One of the most active companies on the M&A market is the semi-state-owned CEZ Group. In 2024, CEZ acquired a majority stake in GasNet, which operates the gas distribution network in the Czech Republic. CEZ is also expanding its connectivity and service offerings after acquiring Edera, one of the largest regional internet providers.
O2 Czech Republic, in turn, has acquired a 100 percent stake in Nordic Telecom Holding, which provides fixed and wireless internet access.
The transformation of a company is always a complex process that requires expert legal and economic knowledge. If you are considering a merger, acquisition or demerger, don’t be afraid to contact us and consult with a lawyer about your course of action. We can help you avoid legal risks and ensure that the entire process runs smoothly.
Tip: Maybe you’re just starting out in business and are considering what name to give your company. We’ve written an article on this topic too, with practical tips on identity in the marketplace.
Acquisitions are not defined in the Act on Company Conversions. Nevertheless, it is an important way in which a company can be converted. That is why we also deal with acquisition in this article, although it is not covered by the Company Transformation Act.
Acquisitions are a corporate strategy tool through which firms can acquire new technologies and strengthen their market position. It is the process by which one company acquires another, either through a full takeover or partial control. In short, when a big fish swallows a smaller one in the same pond. As part of the acquisition, the acquired company may nevertheless remain a separate entity or be fully integrated into the structure of the company that bought it. Acquisitions can take place in different ways and sometimes there is even no agreement between the two companies and the buyer still acquires the acquired company against its will.
Acquisitions are a common business tool and play an important role in the strategic management of companies. They allow companies to expand, acquire new markets, technologies or eliminate competitors. There are several types of acquisitions, which differ according to the relationship between the buyer and the acquired company.
When two companies that operate in the same industry and market merge, it is a horizontal acquisition. Companies usually resort to this step with the intention of reducing their competition, achieving economies of scale and increasing their market share. This is classically the case, for example, with the merger of two competing car manufacturers.
In this case, two companies merge, each at a different stage of the supply chain. For example, if someone operates as an electronics manufacturer, he may buy his component supplier or distribution company. This gives them more control over the whole production and distribution process.
This type of acquisition involves the merger of firms from two different industries, where the firms are not directly related to each other. In this case, firms resort to acquisition to diversify their portfolio, reduce the risks associated with one particular market or increase their shareholder value. An example is when a food giant buys a software firm.
Acquisition is a very complex process that cannot be done without careful planning and thorough analysis. The whole acquisition process is usually divided into several parts:
1. Identification of a suitable acquisition target: If a company wants to make an acquisition, it must first analyze the market and identify potential targets that could give it a strategic advantage in the acquisition.
2. Due diligence: Before the deal actually closes, the buyer must, of course, conduct a thorough analysis of the financial market, legal liabilities, business models and other aspects of the company it intends to buy. The goal of this due diligence is for the company to identify potential risks and consider whether the acquisition is actually worthwhile.
3. Negotiating the purchase price and terms of the transaction: if the due diligence is successful and the company wants to proceed with the acquisition, negotiations begin on the price and any other terms, such as the form of payment (cash, stock), employment terms, or how to integrate.
4. Regulatory approval: There are cases where the acquisition has to be approved by regulatory authorities, such as antitrust authorities, to prevent distortions of competition.
5. Implementation and integration: If all the negotiations go well and the acquisition is completed, the crucial stage is integration. In this process, the acquired company must be integrated into the structures of the acquiring company. In this phase, organisational changes, alignment of business processes, merging of company cultures and possible changes in management take place.
In 2014, for example, WhatsApp was acquired by Facebook. Facebook (Meta) bought WhatsApp for $19 billion, at the time it was one of the largest technology acquisitions. With this move, Facebook wanted to ensure its dominance in mobile communication, as WhatsApp’s popularity was growing and could have threatened Messenger. WhatsApp’s founders left after the acquisition because they disagreed with Facebook’s advertising strategy.
A corporate merger is the combining of two or more companies into one entity, and there are two main forms – a merger (one company ceases to exist and its assets pass to the successor company) and an amalgamation (a new entity is created). Acquisition is the process of one company taking over another, and can be horizontal (merger of competitors), vertical (merger of firms from different parts of the supply chain) or conglomerate (merger of firms from different industries). A demerger, on the other hand, means that a firm splits into several entities, either by spinning off part of its assets into a new firm or by splitting the whole company into several new ones.
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