INTRODUCTION

A. Motivations for Mergers and Acquisitions

1. Exogenous and Endogenous factors Affecting, Motivating and
Dissuading Acquisitions
o A division of a company might no longer fit into larger
corp.s plans, so corp. sells division
o Infighting between owners of corp. Sell and split proceeds
o Better management
o Need for funding
o Market share
o New Technology
o Industry-specific conditions
o Synergies
o Economies of scale/scope
Law on Mergers & Acquisitions
76-80, Corporation Code

Sec. 76. Plan or merger of consolidation. - Two or more corporations may
merge into a single corporation which shall be one of the constituent corporations
or may consolidate into a new single corporation which shall be the consolidated
corporation.

The board of directors or trustees of each corporation, party to the merger or
consolidation, shall approve a plan of merger or consolidation setting forth the
following:
1. The names of the corporations proposing to merge or consolidate,
hereinafter referred to as the constituent corporations;
2. The terms of the merger or consolidation and the mode of carrying the
same into effect;
3. A statement of the changes, if any, in the articles of incorporation of the
surviving corporation in case of merger; and, with respect to the
consolidated corporation in case of consolidation, all the statements
required to be set forth in the articles of incorporation for corporations
organized under this Code; and
4. Such other provisions with respect to the proposed merger or
consolidation as are deemed necessary or desirable. (n)

Sec. 77. Stockholder's or member's approval. - Upon approval by majority
vote of each of the board of directors or trustees of the constituent corporations of
the plan of merger or consolidation, the same shall be submitted for approval by
the stockholders or members of each of such corporations at separate corporate
meetings duly called for the purpose.

Notice of such meetings shall be given to all stockholders or members of the
respective corporations, at least two (2) weeks prior to the date of the meeting,
either personally or by registered mail. Said notice shall state the purpose of the
meeting and shall include a copy or a summary of the plan of merger or
consolidation. The affirmative vote of stockholders representing at least two-thirds
(2/3) of the outstanding capital stock of each corporation in the case of stock
corporations or at least two-thirds (2/3) of the members in the case of non-stock
corporations shall be necessary for the approval of such plan.

Any dissenting stockholder in stock corporations may exercise his appraisal right in
accordance with the Code: Provided, That if after the approval by the stockholders
of such plan, the board of directors decides to abandon the plan, the appraisal right
shall be extinguished.

Any amendment to the plan of merger or consolidation may be made, provided
such amendment is approved by majority vote of the respective boards of directors
or trustees of all the constituent corporations and ratified by the affirmative vote of
stockholders representing at least two-thirds (2/3) of the outstanding capital stock
or of two-thirds (2/3) of the members of each of the constituent corporations. Such
plan, together with any amendment, shall be considered as the agreement of
merger or consolidation. (n)

Sec. 78. Articles of merger or consolidation. - After the approval by the
stockholders or members as required by the preceding section, articles of merger or
articles of consolidation shall be executed by each of the constituent corporations,
to be signed by the president or vice-president and certified by the secretary or
assistant secretary of each corporation setting forth:
1. The plan of the merger or the plan of consolidation;
2. As to stock corporations, the number of shares outstanding, or in the case
of non-stock corporations, the number of members; and
3. As to each corporation, the number of shares or members voting for and
against such plan, respectively. (n)

Sec. 79. Effectivity of merger or consolidation. - The articles of merger or of
consolidation, signed and certified as herein above required, shall be submitted to
the Securities and Exchange Commission in quadruplicate for its approval: Provided,
That in the case of merger or consolidation of banks or banking institutions, building
and loan associations, trust companies, insurance companies, public utilities,
educational institutions and other special corporations governed by special laws,
the favorable recommendation of the appropriate government agency shall first be
obtained.

If the Commission is satisfied that the merger or consolidation of the corporations
concerned is not inconsistent with the provisions of this Code and existing laws, it
shall issue a certificate of merger or of consolidation, at which time the merger or
consolidation shall be effective. If, upon investigation, the Securities and Exchange
Commission has reason to believe that the proposed merger or consolidation is
contrary to or inconsistent with the provisions of this Code or existing laws, it shall
set a hearing to give the corporations concerned the opportunity to be heard.
Written notice of the date, time and place of hearing shall be given to each
constituent corporation at least two (2) weeks before said hearing. The Commission
shall thereafter proceed as provided in this Code. (n)

Sec. 80. Effects or merger or consolidation. - The merger or consolidation shall
have the following effects:
1. The constituent corporations shall become a single corporation which, in
case of merger, shall be the surviving corporation designated in the plan of
merger; and, in case of consolidation, shall be the consolidated
corporation designated in the plan of consolidation;
2. The separate existence of the constituent corporations shall cease, except
that of the surviving or the consolidated corporation;
3. The surviving or the consolidated corporation shall possess all the rights,
privileges, immunities and powers and shall be subject to all the duties and
liabilities of a corporation organized under this Code;
4. The surviving or the consolidated corporation shall thereupon and
thereafter possess all the rights, privileges, immunities and franchises of
each of the constituent corporations; and all property, real or personal,
and all receivables due on whatever account, including subscriptions to
shares and other choses in action, and all and every other interest of, or
belonging to, or due to each constituent corporation, shall be deemed
transferred to and vested in such surviving or consolidated corporation
without further act or deed; and
5. The surviving or consolidated corporation shall be responsible and liable
for all the liabilities and obligations of each of the constituent corporations
in the same manner as if such surviving or consolidated corporation had
itself incurred such liabilities or obligations; and any pending claim, action
or proceeding brought by or against any of such constituent corporations
may be prosecuted by or against the surviving or consolidated corporation.
The rights of creditors or liens upon the property of any of such
constituent corporations shall not be impaired by such merger or
consolidation. (n).

Rules on Liability of Succession in Corporate Acquisitions and
Transfers
Edward J. Nell v. Pacific Farms 15 SCRA 415 (1965)
Generally where one corporation sells or otherwise transfers all of its
assets to another corporation, the latter is not liable for the debts and
liabilities of the transferor, except: (1) where the purchaser expressly or
impliedly agrees to assume such debts; (2) where the transaction amounts
to a consolidation or merger of the corporations; (3) where the purchasing
corporation is merely a continuation of the selling corporation; and (4)
where the transaction is entered into fraudulently in order to escape
liability for such debts.

PHB v. Andrada Electric & Engineering Co. 381 SCRA 244 (2002)
Basic is the rule that a corporation has a legal personality distinct and
separate from the persons and entities owning it. The corporate veil may
be lifted only if it has been used to shield fraud, defend crime, justify a
wrong, defeat public convenience, insulate bad faith or perpetuate
injustice.
A consolidation is the union of two or more existing entities to form a new
entity called the consolidated corporation. A merger, on the other hand, is
a union whereby one or more existing corporations are absorbed by
another corporation that survives and continues the combined business.
The merger, however, does not become effective upon the mere
agreement of the constituent corporations. Since a merger or
consolidation involves fundamental changes in the corporation, as well as
in the rights of stockholders and creditors, there must be an express
provision of law authorizing them. For a valid merger or consolidation, the
approval by the Securities and Exchange Commission (SEC) of the articles
of merger or consolidation is required. These articles must likewise be duly
approved by a majority of the respective stockholders of the constituent
corporations.

McLeod v. NLRC 512 SCRA 222 (2007)
As a rule, a corporation that purchases the assets of another will not be
liable for the debts of the selling corporation, provided the former acted in
good faith and paid adequate consideration for such assets, except when
any of the following circumstances is present: (1) where the purchaser
expressly or impliedly agrees to assume the debts, (2) where the
transaction amounts to a consolidation or merger of the corporations, (3)
where the purchasing corporation is merely a continuation of the selling
corporation, and (4) where the selling corporation fraudulently enters into
the transaction to escape liability for those debts.

Consolidation is the union of two or more existing corporations to form a
new corporation called the consolidated corporation. It is a combination by
agreement between two or more corporations by which their rights,
franchises, and property are united and become those of a single, new
corporation, composed generally, although not necessarily, of the
stockholders of the original corporations.

Merger, on the other hand, is a union whereby one corporation absorbs
one or more existing corporations, and the absorbing corporation survives
and continues the combined business.

The parties to a merger or consolidation are called constituent
corporations. In consolidation, all the constituents are dissolved and
absorbed by the new consolidated enterprise. In merger, all constituents,
except the surviving corporation, are dissolved. In both cases, however,
there is no liquidation of the assets of the dissolved corporations, and the
surviving or consolidated corporation acquires all their properties, rights
and franchises and their stockholders usually become its stockholders.

The surviving or consolidated corporation assumes automatically the
liabilities of the dissolved corporations, regardless of whether the creditors
have consented or not to such merger or consolidation.

Sale of Substantially All Assets
Stiles v. Aluminum Products, Inc. 338 Ill. App. 48, 86 N. E. 2d 887
Except where a statute provided otherwise, in order for a corporation to
do certain things, such as consolidation or merger or transfer of all
corporate assets, etc., the unanimous consent of the stockholders was
necessary.
These restrictions were not in accord with modern needs and hence
statutes were passed permitting the corporation, upon a vote of at least a
majority of the stockholders, to perform such corporate acts. "In enacting
such statutes, however, it was realized that it was necessary to afford
some relief to dissenters, with the result that in most jurisdictions statutes
were enacted which give the dissenters the right to receive the cash value
of their stock and provide for an appraisal where no agreement as to value
can be reached." (13 Fletcher Cyclopedia Corporations, sec. 5891.)
The statute in question has a twofold purpose: to facilitate sale of assets,
merger, etc. of a corporation by a two-thirds vote of the stockholders, and
to protect the interests of the minority dissenting stockholders.


Gimbel v. Signal Companies, Inc. 316 A. 2d 599
"Every corporation may at any meeting of its board of directors sell, lease,
or exchange all or substantially all of its property and assets, including its
good will and its corporate franchises, upon such terms and conditions and
for such consideration, which may consist in whole or in part of money or
other property, including shares of stock in, and/or other securities of, any
other corporation or corporations, as its board of directors deems
expedient and for the best interests of the corporation, when and as
authorized by a resolution adopted by a majority of the outstanding stock
of the corporation entitled to vote thereon at a meeting duly called upon
at least 20 days notice. The notice of the meeting shall state that such a
resolution will be considered."

Bulk Sales Law (Act No. 3952 (as amended by R.A. No. 111)