The merger of two business entities combines their assets and liabilities under one common stock. Although it’s less common than a company acquisition, the right merger can accelerate growth and boost revenue. There are many reasons why companies pursue business mergers and acquisitions, including strategic expansion, diversification, hedging risk and repositioning for a new market. Regardless of the reason, a merger requires a strong business plan and clear strategic goals. Learn more about the different types of mergers and what factors can affect their success.
A key factor for a successful merger is the level of transparency that is available throughout the process. Without open communication, staff fears and anxieties can disrupt productivity and morale. To avoid this, it is important to keep all staff members informed of the M&A and its projected benefits.
M&As can be very complicated, particularly when a company is seeking to absorb another business with different standard operating procedures. For example, it could be challenging to reconcile the differences between two companies’ employee benefits and compensation programs or the number of work shifts. Mismatched corporate cultures may also present challenges. For instance, staff on both sides of the M&A may be reluctant to accept a new manager if there is a difference in management style or culture.
A merger can be completed via a share exchange or an asset purchase. The former is typically preferred because it doesn’t require the transfer of ownership of any physical assets. In an asset purchase, the acquiring firm purchases only the assets it wants and pays for them in cash.