The Benefits of Mergers - Part 2

When two business owners decide to merge their businesses, both will benefit from the transaction as long as the marriage of companies is well-suited. As discussed in Part 1 of this series, the benefits of a merger may ultimately be quantified in financial terms but their effects may also be linked to broader issues (mental well-being of workers, revitalization of an industry, etc.)

1.  Tax Benefits

When a profitable company takes over a company that has been hemorrhaging funds, the new merged company will receive tax benefits. A merged company will likely also enjoy a subsidized rate of taxation.

2.  Increase in Goodwill

Customers, shareholders, and employees alike will often experience a boost in confidence in a company when it is merged with another. The perception of “bigger is better” works in the new company’s favor.

3.  Additional/New Business Intelligence

Ideally the two businesses that merge will have complementary systems, managers, and processes to fill gaps in knowledge they each suffered from before the merger. The adage, “If you can’t beat’em, join ‘em,” rings true to many business owners who are considering a merger.

4.  Diversification

Sometimes a merger involves two businesses in different industries, but their interests work in tandem with one another. Two industries can benefit from a creative use of each other’s resources, and the result is one large company that is linked to a wider variety of consumer needs and an overall larger customer base.

5.  Research and Development

The increase in financial assets will allow for more investment in R&D. Additional R&D will expedite production evolution (whether in the processes used or the products and services that are offered) and lead to better quality for consumers.

If you are entertaining the possibility of merging with another business, contact us confidentially at George & Company. We would be happy to help you through the entire merger or acquisition process, from start to finish.