In the business world, you hear about mergers all the time. But do you understand what this entails and when it makes sense to do one? If you’re involved in a business, the time may come when a merger could benefit your organization. The more you understand today about this process, the more prepared you will be when the time comes to act and move forward. This may or may not be the right thing for your business now or in the future, as a business lawyer, such as from the Law Offices of Arcadier, Biggie & Wood, can explain.
A Brief Summary
A merger is common between small- or medium-sized businesses. It occurs when two separate entities combine to form one new organization. A merger can also involve one company purchasing the other company’s stock in exchange for its own. In a merger, key management does not change, but both organization’s leaders remain intact to lead the new organization.
Purposes of a Merger
Companies in the same or similar industry may have several reasons to consider merging. This process can provide benefits to both companies and to the leadership and employees. Many companies merge to combine their strengths and resources to form a larger, more efficient organization. By merging into a more robust company, the new organization now has increased capacities to meet customers’ demands. A merger can help the company increase its profits and output, including accelerating research and development. In some instances, one or both of the companies that merge may be on the verge of going out of business. This process can prevent that from happening. Many businesses can efficiently scale their processes by combining with another company. The merger can allow the organizations to combine equipment, tools and other resources.
The Downside
Merging isn’t always the answer for a struggling business. Combining businesses can require layoffs or major changes in job functions. This can lead to dissatisfaction or low morale in the workplace. It’s vital that the merging businesses share similar goals and values. When two vastly different companies merge, it can cause tension and a lack of synergy. In addition, customers may become frustrated by a suddenly reduced number of choices in products, goods and services.
Before deciding to merge, the respective leaders should meet and discuss the pros and cons of this transaction. A business lawyer or consulting can give you an unbiased outlook of what to expect from this process and whether it makes sense for you and your partners.