By: Brian Rees, Media Relations Representative for FB Solutions
Many business owners wonder about a merger at some point in their careers.
You may be in a position to consider a business merger for a number of reasons. Whether you’re growing your business, teaming up with a competitor to survive or looking to broaden your product line, take some time to answer the questions below to better prepare your business for what a merger will bring.
You’ll need to have a large amount of capital to complete the merger. You’ll need much of this capital for legal fees. However, always remember a merger is sometimes a lot like starting a brand new business. This means your profits may take a hit for a considerable amount of time after the merger until you realize synergies and increase efficiency. You’ll want enough capital on hand to get you through these rough patches or growth opportunities.
What are the outstanding debts of the target business you plan to merge with? After the merger, you’ll be responsible for them. Remember, the owner of your target business has an incentive to make these debts seem as small as possible. Do your homework by contacting public records and suppliers to make sure you’re getting a fair deal.
Always keep in mind that a merger is stressful for the employees of both companies. Some employees fear new owners will lay them off. Others recognize their jobs may become redundant. Remember, if you want to be successful, you’ll most likely need these employees after the merger. Make sure you do what you can to minimize your new and existing employees’ stress. If you don't think you can do this, you may want to reconsider your idea of merging with another business.
Reassess the Competition
What will the competitive landscape look like after your merger? Some targets may mislead you to believe you’re buying your way out of competition. However, keep in mind the business you’re targeting may already have a host of competitors in that area that you’re unaware of. Those competitors will now be your competitors. If you’re not up for this task, you may need to rethink your merger.
After you consider all the above topics, take the time to consider why you really want the merger. Does it make good business sense – will it increase profits, help you integrate vertically to reach new customers in your sales funnel, broaden products or even refine your core business – or are you simply thirsty for the thrill of expanding your business and taking out a competitor at the same time? Answer these questions honestly with your business’s best interests in mind.
A merger can be fraught with peril, but it can also be one of the best ways to take your company to the next level. Decide if you want to beat them or join them.
Brian Rees is a media relations representative for FB Solutions. In his spare time, he enjoys writing, music, and spending time outside.