How to Do a Business Merger Properly

A business merger is an exciting opportunity for any company. When you consolidate two or more businesses, you’re merging staff, IPs, assets, and resources, forming a new team. Naturally, this breeds difficulties along with major conflicts and disagreements when done wrong. You must prepare, plan, and execute the merger with tact.

Even with this mantra in mind, many variables exist where the merger can take an unfortunate turn. Here is how to do a business merger the right way and prepare yourself for the process:

Learn about the business

Before you decide a merger is your next step, learn as much as possible. Learn about the company, their strengths and weaknesses, as well as how they’re perceived. Also learn about their employees, their customers, the press they have, what the reviews online say, and more. Perform your due diligence, identifying any possible problems that could pose a risk to a possible merger.

Understand why you need to merge

Clearly write out what a merger’s goals are. You may want to grow market share and your customer base. You may also be interested in reducing costs, streamlining certain processes, or developing new products and services. Understanding your objectives will help inform certain decisions as you take two separate entities and rebuild them as one.

You should also understand which type of merger best suits your business. There are four main types of mergers:

  • Conglomerate merger: This is when two unrelated businesses merge.
  • Horizontal merger: This is when two companies offering similar products or services come together rather than continue to compete against one another.
  • Vertical merger: This is similarly structured to a horizontal merger, although it often involves companies at different levels in the production process.
  • Concentric merger: This is when two companies come together that produce different products, however, they have the same customer base.

Manage your finances

A merger can occur two ways. One business purchases another, incorporating them under a single brand. Then, there are two companies coming together to form a third company entirely new. A real merger is when two companies come together to form a new company. The alternative option in structuring a sale is more of an acquisition than a sale.

Each company likely has a number of debts owing on their name. This increases a merger’s liabilities. Not dealing with these debts can impact a merger’s ability to acquire new credit or reduce the initial success coming out of the gate. Ideally, before a transaction, perform a thorough financial check and make each company right with its lenders. This will also show whether the resources exist to complete the merger transaction.

Assemble a transition team

Merging two businesses is like putting together two sports teams. You have more or less two people for every position. This is why mergers generally lead to anxiety, skittishness, nervousness, and employees being worried about their jobs. Your merger needs a team to steer the ship. Assemble a transition team and put your main management players in their positions as quickly as possible.

Hiring a specialist in business mergers can present several advantages. Merger specialists like Redcap&Truss can ensure you’re doing everything legally required in the merger process. They also negotiate a letter of intent that outlines the structure of the deal. This is someone you can consult with on key decisions. You can rely on them through what can be a long and grueling process.

Identify the company culture

It’s not unheard of to have culture clashes in a merger. This necessitates deciding on new philosophies, new company culture, and new values. Your employees should know this before customers do. In a merger, one of the first things you can do that will help strengthen your immediate situation is to let employees know what you know. Manage their expectations. Don’t wait to draw up a company culture document.

You may already see where conflict is likely to occur. Connect with those in charge and all relevant parties to confirm a conflict. Draft a solution and enact at least a verbal agreement on how to move forward. Keep in mind there may be conflicts you don’t see coming. The same process applies. Connect, identify the conflict, and agree on a resolution.

Prepare for the future

Two businesses coming together means more resources, more systems, more market share, potentially entering into new markets or territories, and more customers. Assign a management team that can oversee the moving from two to one. You need to identify what the new systems, processes, and marketing will look like.

This sort of strategizing and the key decisions involved in moving forward can take weeks to iron out. To start, it’s important just putting the right people in place. Your future objective is to restructure corporate hierarchy to incorporate more management and more divisions, and within reason.

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