While mergers and acquisitions are the two processes that make up the M&A industry, the purpose behind the two could not be more different. Business owners looking to sell do so typically for personal reasons, whether it be due to retirement, an illness, financial struggles, or for financial gain. Most business owners leave the company altogether not long after the acquisition is completed. On the other hand, mergers are more frequently implemented to improve business strategy, and the key staff members will remain with the company. Typically a large business will absorb a smaller one in order to benefit both parties. Oftentimes, a merger will occur when a company is being overtaken by their competitor, and they choose to be bought out rather than attempting to compete with a larger corporation. The main benefits of a merger are as follows.
A More Complete Business
Combining the synergies of two companies has the potential to grow the business into a successful conglomeration if managed correctly. A merger is beneficial when two similar companies can complement each other with the sum of their parts. For example, a company that sells computers may manufacture a great product, but their support team could be lacking. Merging with an IT company would make the less specialized parts stronger and therefore create a more powerful business model.
Protection from Competitors
The newfound strength garnered by this merger will help brace the business against other competitors, as they can more effectively cater to their niche. Mergers also help compete against a disappearing industry by turning competitors into allies.
A merger tends to be highly cost-effective because the capital of both companies is combined, and their expenditures are lowered, since many roles may be duplicated. The merger frees up more capital to be made available for investing in new ideas, raises for key employees, and paying off business debts. Bulk buying will also help lower business expenses.
Larger Market Reach
Each company brings with them their own customer base and target market. Combined, it allows the merged company to reach certain types of clients that may not have been so easily accessible previously. Quality over quantity can be a central focus now that the company is less desperate for new customers and there is more capital to go around.
With more capital, the merged company also has the ability to explore new markets and create different types of products. The combined experience of the top experts from both companies will help to generate bigger and better innovations.
If a merger sounds like something that could be a benefit your business, please contact us at George & Company. We are one of the premier mergers and acquisitions firms in New England. We would be happy to speak with you in complete confidence about how a merger can improve your business.