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Nov
12

The Pros and Cons of a Business Merger

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Advantages and Disadvantages of a Business Merger

>> Business Merger

Mergers come to the fore of corporate life for many reasons. One of such reasons is that it makes good business sense when an opportunity arises to join forces with another company and reap the dividends of working together. A smart business merger gives you the opportunity to enter new markets and reach even more customers. Furthermore, because of combined strengths, a merger can override the competition.

Mergers give you an edge in the cutthroat world of competition. They help fast track your success story because in a partnership you can afford to launch new products, open new distribution channels, improve technical knowledge and expand infrastructure base. Partnering with another company offers fantastic opportunities. However, it is crucial that you get things right from the jump. This includes finding the right company to merge with, knowing how much they are worth and working with seasoned professionals like lawyers and accountants who ensure that you get the best deal possible.

If done right, mergers are legally simple and do not cost as much as an outright acquisition. The reason being that both businesses have agreed to combine operations and so there is little need to transfer titles, deeds or assets from one business to the other. Mergers enable companies to restructure and strategize, thereby eliminating any arms of weakness. This puts them in a potent position for the journey ahead.

A merger makes it possible for companies involved to make new investments and realize even better profits. In addition, the transaction inspires greater confidence from customers with the firm seen as more reliable and capable of gaining market share. This development will in turn attract more customers who will be encouraged and confident that they are in the right hands.

However, mergers come with a fair share of disadvantages. One major disadvantage of a merger is that it needs to be sanctioned by shareholders from each firm. On the average, over two-thirds of votes are needed for approval. And that is if there are no high-stake politics or power-players to contend with. When decision-making is not clear-cut and needs to follow procedures, a merger can prove difficult and lengthy.

Mergers can also create a clash of goals and objectives between businesses, meaning that decisions would become harder to make and disruptions could just become commonplace.  This can cause strife and disaffection amongst workers too as positions might be limited and some staff might need to be laid off.

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