July 15, 2018 | Last Updated on: July 20, 2023
Tips when considering business mergers
If you’ve taken the plunge as a business owner and have decided to merge with another company, you will be about to start a new chapter that’s sure to bring plenty of challenges along the way. Both businesses involved will have a certain amount of expectancy and uncertainty, and with a merger it’s absolutely critical to get the early days right. You are taking a considerable risk; but with the right amount of preparation and a well-developed strategy, the success of your merger will be considerably more likely. Follow the points below so you know the key considerations to make when navigating a successful business merger.
There are various benefits to a business merger. Although at first, such a decision may seem drastic, with unachievably high goals, there are lots of good things that can come about through a merger and make it all worth the effort.
It may seem obvious, but by merging two companies, you will naturally become stronger than the two separate companies were on their own. By bringing together a pool of talent, experience and know-how, you will have the strength of two behind you when looking for new business opportunities. This can be very powerful, as each company may have been an expert in its own particular area before the merger. By sharing knowledge both businesses will be able to give as well as receive insight into an area of expertise that, as individual ventures, you may not have previously explored.
Knowing your demographics is another fundamental if you want to lead a successful merger. This most often applies to areas of the market that one company may be inexperienced with, but through a merger, they can gain exposure to. Alternatively, it could apply to companies looking to expand their business overseas, for example. As opposed to trying this solo, partnering with a business already established in that country will result in working with individuals who are familiar with the current market, with developed relationships with potential clients and customers predetermined.
In a merger, not only will you be sharing expertise, but you will also be sharing customers and clients. Rather than losing any customers, you will merely be gaining a higher number of clients that will collaboratively make your new combined company more of a front-runner in your given line of business. You have to be careful with this, though. If the company you’re merging with had loyal fans, you need to do everything you can to prove to them that the combined company will still do everything for them they liked about the old one. Many mergers have gone south because owners forget to abide by this very important principle.
By joining two companies together, you will be naturally giving both further opportunity to create and devise new products or services with a stronger team to work with, in terms of manufacturing, distribution, research, design, and development. With a group of minds working on new ideas and products, with the added benefit of previous knowledge in that sector, you will see your company branch into new lines of business that, previously, you may not have been able to achieve, or see come to fruition at any point. You will then be able to offer your existing customers diversification of the products and services you can provide.
Merging with a business will inevitably save you money; with more purchasing power and a stronger position in the market, volume price reductions can be made regarding deals with manufacturers and distributors, as well as expenditures on marketing campaigns, for example. It’s what the consultants of the world call “synergies” and your new, bigger small business will definitely benefit.
Now we have explored why a merger can be worthwhile for your business, you may be wondering how you go about your merger, to ensure both businesses come out on top. Below we’ve highlighted some fundamental factors involved in a successful business merger.
Communication
As with any aspect of business, communication is key, but it is even more important if you are in a merger situation. In the early days, you will find that your lines of communication will need to be constant as both businesses are becoming familiar with the processes of the other company. Constant communication is key, as, in order for your merger to succeed, both businesses need to be on the same page regarding their goals for the business and what they hope to achieve. Understanding the fundamental practices already integral to each business will be important, as will getting a grounding of where each business stands financially. You cannot hope to successfully merge if all these matters are not discussed, and the sooner the better.
Another key aspect of a successful business merger is to establish goals for the merger itself. It is all very well merging businesses and working together, but how you can hope for this to lead anywhere if both parties fail to establish what the desired outcome of this merger is? By having a joint milestone to aim for, you will be putting your newly merged company in a stronger position in terms of the organizational transition, as both will be working with the same goal in mind. With any business, of course, ensuring you have established plans and practices in place that will be beneficial is essential. This includes financial plans so that you can approach your merger in the best possible way. By working out the direction you want your business to go in, you’re giving yourself more certainty that you won’t be brought up short by unexpected twists and turns. Financially speaking, within the first few months or year you need to know exactly how much money you need to meet your goal. Determine how you may need to work small business loans into your financial plans should you need them, as these can help to see you through a particularly tricky period.
Prepare for Change
Going into a merger, you should prepare employees and partners to be ready for change. There will naturally be many concerns and questions when it comes to a merger, as it will be a time for natural excitement, but also uncertainty in the early days. Be prepared to be flexible and open to suggestions about where you will take your business, as the whole point of a merger is that you will be working collaboratively and closely with another company. Taking on advice and ideas, especially from your employees, has to be a main priority for you so that you get your employees to be excited for the future, especially as you begin your journey as a joint market force.
Prepare For Unexpected Costs
As part of a business merger, both companies will be venturing into the unknown, and it will be inevitable that ups and downs will be involved. This is part of the process for any new business venture, and with a merger, there will be an added level of risk as you are taking two separate entities and attempting to bring them together for the first time. Mistakes will be made, and the ideas you had going into the process may have to be changed quickly. In some cases, as discussed above regarding your financial plans, you may be in a situation where you would need to look into getting a business loan, in order to stabilize your current business venture. SBA loans or other specialized financing products (like business loans for women) are several options that you may want to look into. Preparing for setbacks shouldn’t stop you from going ahead with the merger; however, it is best to be prepared for anything, as this can help both companies effectively work together and successfully manage and difficult periods.
Establish Individual Roles
Establishing the roles employees (and owners) play within the new company is another key consideration to make as you merge companies. An understanding of what each person’s role involves, such as delegation and authority will be essential if both parties want to succeed. It may prove more difficult in practice, as individuals may have different visions and opinions on how to approach new opportunities. This can be avoided by understanding who does what, and what responsibility each individual has, sooner rather than later. Of course, this may naturally change as time goes on, but to ensure there are no crossed swords and bouts of potentially damaging miscommunication early on.
Navigating a business merger can be a challenging experience, but it’s a rewarding venture for both parties when you get it right. Joining two successful businesses will bring experience and knowledge together, forming a stronger, winning formula, which can conquer the industry.
