Mergers & Acquisitions

Comistar provides support in both international and domestic mergers and acquisitions (M&A). International entirety is varying and requires comprehensive familiarizing and research.

Domestic changes in company structure from legal perspective:


Merger signifies change in company structure, in which a company (merging company) merges into another company (acquiring company), in which event the assets and liabilities of the merging company are transferred to the acquiring company and the shareholders of the merging company receive shares in the acquiring company as merger consideration. The merger consideration may also consist of cash, other assets and future undertakings. The application of neutral taxing regulation requires that the merger consideration consist of the new shares of the acquiring company or in addition maximum 10% cash of the shares nominal value.

Merges starts with drawing up the terms of merger, which shall be dated and signed. The draft terms of merger shall contain among other things the reasons for the merger and define the merger consideration. Contents of the terms of merger have been defined more specific than in previous legislation. The companies involved in the merger must designate auditor to issue a statement on the draft terms of merger to each of the companies involved in the merger. Usually the decision on a merger is made by company´s General Meeting.

The draft terms of merger and the statement of the auditor shall be notified for registration within one month from the signing of the proposal. The registration authority shall issue a public notice to the creditors. According to the previous law the company was required to deliver various financial documents (f.ex. financial statement) to trade register. Nowadays it is enough to keep the documents available to the shareholders. Procedure in the registration authority has also otherwise been simplified and in certain cases made faster than earlier.

It is possible to carry out the merger process in less than four months but in many cases the process can take more than half a year.


New Limited Liability Companies Act provides a new company change structure, triangular merger. The difference between triangular merger and traditional merger is that in triangular merger another party than the acquiring company provides the merger consideration. This means that the merger consideration can be shares of the parent company of the consolidated company. In many cases, this would be more practical than that the (minority) shareholders of the merged company become shareholder in the company´s indirectly owned company.

The problem is that the regulation of the commercial activity taxation act, according to which the taxation of merger is neutral does not apply on triangular merger. In this respect, taxation regulation was not changed when passing the new law, nor did, so called “Arvela´s II working group” suggest changes in relation to triangular merger. Even though triangular merger was committed in accordance with requirements of the law, would the merging company be considered to be dissolved as it comes to taxation. Therefore the property transferred to acquiring company is valued at market value and the profit is seen as taxable income. Also in the taxation of the shareholder, triangular merger is considered as taxable transfer. For these reasons, triangular merger is usually not the best option.


Demerger is a reversed change in company structure compared with merger. In demerger assets and liabilities of the demerging company are transferred in full or in part to one or several companies and the shareholders of the demerging company receive shares in the acquiring company as demerger consideration. The demerger consideration may also consist of cash, but according to Act on industrial and economical activity, this amount shall not exceed 10 % of the nominal value of the shares given as demerger consideration.

A proposal for the division of the assets and liabilities of the demerging company between each of the acquiring companies is defines in the draft terms of demerger. The division of assets and liabilities will be binding for creditor as well, unless he objects to the division. The same changes as described above in the chapter about merger, relate to demerger procedure and draft terms.

When demerger is realized correctly it is possible to divide the business and property into practical unities. This is suitable for example on pursuance of corporate acquisition, change of generation or when there are new shareholders joining the company.


According to the old Limited Liability Companies Act demerger was supposed to be committed only in the manner that the acquiring company is established in the context of the demerger. Now it is possible also demerger into an existing company. This structure change is usable for example when one of the many business areas is wished to combine with another company´s business. In this case the other party of draft terms of demerger is this other company.

The regulation of the commercial activity taxation act made the neutral taxation possible even in this type of demerger, but without similar regulation in Limited Liability Act this could not be committed.


M&A’s are different every time; there is a large variation of different kind of buyers and sellers. Number of factors must be considered when doing a valuation including timing which can make a big difference.

In practice small and medium-sized businesses are valuated based on discounted cash flows and company’s net asset value.


When you want use acquisitions to expand your business you have to have the best possible experts with the most recent knowledge at use. Comistar has an extensive experience of executing different size acquisitions.


When exiting a business Comistar can be a strong partner in negotiations and drawing contract specifications. These can be crucial when trying to get the best deal possible.


The timing of selling, the country in which it takes place, seller’s home country, definitions of ownership. These are all issues you have to keep in mind when selling a business and therefore your plan about taxation should be well executed to get an efficient result.


Comistar’s law experts will provide all the needed contracts for the deal. The contracts must always be made in cooperation with the owners/responsible person of the business. Using third-party experts is favorable.

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