Company mergers and acquisitions are a common and everyday occurrence. That is not to say that there are not challenges associated with a merger or acquisition that parties to a merger or acquisition should be familiar with. Merging businesses is an opportunity to improve the performance of each of the businesses by benefiting from the advantages and resources of both companies.
When merging companies, there are several important considerations to address to help facilitate a successful merger. It is initially important to determine if the merger is a horizontal merger or a vertical merger. Horizontal mergers refer to mergers between competing companies, while a vertical merger is typically the merging of a business and a supplier. It is also important to ensure that no part of the merger is illegal, especially in circumstances of a horizontal merger which may eliminate competition.
Parties to the merger should negotiate and determine the terms of the merger early on. Stock options are typically shared in a merger, however, one company’s stock is commonly worth more than the other’s so the details of the exchange have to be worked out in advance between leaders and representative s of the companies. Next, it is important to decide on a new name for the company if the merged company will not operate under the name of either of the two previous companies.
Determining the structure of the newly-merged company is important as well. Because one of the primary goals of a successful merger is a business opportunity to create a more profitable company, it is important to eliminate inefficiencies such as redundancies which may involve knowledge of employment laws and employment contracts, among other important considerations. Finally, after all the legal aspects of the merger have been completed, it is important to disclose the carefully thought out details of the merger to shareholders, employees and the public. With care, mergers can provide excellent opportunities for growing businesses.
Source: Smallbusiness.chron.com, “How to Merge a Business,” Jack Powell, Accessed Nov. 8, 2015