Is a Business Merger Right for Your Business?

Before you start the consolidation, you need to be sure of what the business will achieve from the merger.

Posted by Your Local Expert - February 12, 2019

Merging different business entities into one unit is a process that needs keenness and a lot of hard work. The merger's success depends on a prior analysis of the pros and cons of the merger to the business and all associated affiliates. Once the benefits of the merger are apparent and the need for the merger real, the execution process is vital for the success determination of the merger. The merger will affect the operations of the business and all the units in the firm; it is, therefore, imperative that before the process takes place, investigations are done on the ability of the business to accommodate the changes and improve the productivity of the firm. Here are key things you should know before you actualize the merger;

Make a clear plan of the merger

Before you start the consolidation, you need to be sure of what the business will achieve from the merger. Do not enter into a merger before doing the analysis and ensuring that the firm will benefit from such an arrangement. Going into it blindly will only serve to destroy your business, be diligent and research.

Ensure compatibility

Every business has work culture and ethics; for any business merger to succeed, the two companies must share a lot in their culture and the general way of executing their plans. There is nothing as difficult as trying to operate when the two business has different methods of doing things. The differences will only lead to disagreements and eventual collapse of the merger. Just like a marriage, there must be some bonding between the business from different aspects to sustain or even boost the business obtained by the firm.

Involve the experts

Merging a business is a binding decision that should not be made in a hurry. Proper consultation must be done to ensure that the best decision is reached. Involves all the experts you may need including accounting, legal and economics experts. The panel should guide you before you sign the merger document to prevent flimsy and avoidable mistakes that otherwise has the potential of destroying the business. Know what is to be kept confidential and what is to be revealed to avoid being shortchanged and fighting prolonged legal battles which may have serious cost implications on the business.

Be open to negative outcomes

It is true that most mergers do not work as well as earlier planned. When you have the allowance of a negative eventuality, you will be in a better position to approach the issue more somberly and make necessary arrangements to cushion your business in case of the merger's failure.

Get your Facts right

Ensure you have specific needs for the merge, what is achievable from the merger, the expected results and all essential information about the merger business candidate. This knowledge allows you to make informed decisions on the merger.

Benefits of a merger

  1. Economies of Scale. Mergers create a strong team that favorably compete I the market making them have the upper hand on the market. The increased business muscle allows the consolidated company achieve significant returns as opposed to single individual firm.
  2. Provision of funds for research. Research and development department has a direct impact on the performance of any business. Mergers give the business financial muscle to invest in the research and development leading to increased quality and new inventions.
  3. The mergers can help reduce duplication in the market when the two companies produce more or less the same products. Merging strengthens them to provide better products and target a larger clientele.

The benefits of the merger are numerous. However, mergers should be implemented well to guarantee success. If not, the mergers can lead to diseconomies of scale, monopoly environment as well as massive job losses. The suitability of mergers to your business thus depends on how well you research and execute the plan.