Merging your business with another is a wise decision but can sometimes be a dangerous move and might be the downfall of your business. Before you decide on what to do with your business, it is important to first understand the pros and cons for merging businesses for mutual growth.
Merging a business is a lucrative change of business especially if you have a small business. Small business stand to benefit since this is the best business growth strategy. The small business will find a way into a new and valuable market. The business also stands to benefit from the large customer base that had already been created and thus increase the value of the business.
If there is a reverse merge, a business stands to benefit. This is whereby a private company merges with another existing, publicly-traded shell. When the private company merges into the public, it becomes a publicly traded company. The private company will still have say into the management as investors put funds into the new entity.
If done correctly, merging businesses are legally simple and won’t cost you much as compared to an outright acquisition. This is because the two businesses have decided to come together and so there will be no transfer of titles, assets or deeds from one business to the other.
One of the dangers most people overlook when they decide to merge businesses is the high expectations involved versus the realities of managing the business.it is important to understand that there are very different business histories and cultures.
When companies of the same size merge for mutual growth in what is referred to as the Merger Accounting, it becomes dangerous since this can lead to takeovers. This makes the business unbearable for both the employees and the shareholders.
There can also be a clash of goals and objectives between the two businesses. This means that it becomes hard to make decisions for the good of the business. If there is no mutual understanding in any business, some staff have to be laid off.