From improving a company to consolidating excess capacity to scaling industry value, a business merger or acquisition focuses on improving and making additional capital. If you are considering this route for your business, below are a few tips on what to expect.
The Breakdown
Business acquisition and mergers are sometimes mixed up. When a merger is involved, two companies become one. In this method, one of the companies foregoes its previous business name and takes on the new, adopting its policies and procedures.
When it comes to business acquisitions, two companies work together, while still keeping their branding, business names, and control. This makes each company a parent company of the other.
The Pros
Business acquisitions can become an option when a company wants to focus on a new product or market that already has a well-recognized and respected brand. This reduces the entry to barriers, saves costs, and allows access to a pre-existing clientele.
Businesses will also see an increase in market share when they partner with another company. This can allow your company to gain a competitive edge and achieve market growth. Access to expert knowledge the business didn’t have before will finally be available through the new company’s research, financial and legal specialists, along with access to additional capital. These types of gains help achieve market synergies.
The Cons
As with everything new, there can be challenges with change. When companies come together for business acquisitions, there can be issues with duplicated job duties, confusion on objectives, and workplace culture.
Overcoming the objectives takes time and effort, along with clear communication for both businesses. It’s important to pay attention to current suppliers and maintain communication on the new goals, services, and supplies that are expected. Make sure your suppliers can handle the changes, and if there is a need for additional help, stay ahead of the game by hiring additional suppliers or talking to the current suppliers on how to achieve the new objectives.
When businesses choose to expand, a business acquisition is one of the key ways to achieve expansion in their desired field. This can help the company improve market share, achieve growth quickly, and garner synergies with assets. Although there are many gains to this method, it does come with a handful of cons. To maintain a smooth transition, companies should be clear on goals, communication, and culture, while also keeping an eye out for duplicate job duties and making sure current suppliers can handle the new changes and demands of the job.
