The one thing that companies all over the world struggle with the most is their cash flow. About a third of these businesses can’t pay their vendors and employees.
If you’re one of the 61% struggling to keep your doors open, it may be time for you to consider company mergers. If you join up with another business, you’ll have the financial power of both.
You’ll also have access to a larger talent pool and save money on company operations. Reaching a wider market is another plus.
These are only a few perks of business mergers. Check out this guide to learn more.
What Are Company Mergers?
Mergers are voluntary partnerships between two companies. They’re often done to help both businesses reach a wider market and save money.
There are different types of mergers. The first is a conglomerate. This is a fusion of two companies that have nothing at all in common with each other.
Congeneric mergers are the exact opposite. This involves companies that share the same market.
A market extension is a fusion of two companies that sell some of the same products but compete in opposite markets. Horizontal mergers are between businesses that operate within the same market.
No matter which option is right for your situation, you’ll need to get in touch with a mergers and acquisitions lawyer to begin the process.
Reach a Wider Market
Let’s say that a European company would like to reach potential customers in the US. That might be a bit difficult if they won’t have their foot in the door.
In this instance, they might benefit from joining a company in the US that works within the same industry. This will allow them to easily dip their toes in the market and build their brand.
When two people work within the same industry and produce similar products, they are in direct competition with each other. If these two companies were to merge, they’re no longer fighting for customers.
They’re able to act as a single entity. Company A will bring their customers to company B and vice versa.
Oftentimes, merging a company means that both parties involved save money. Instead of renting out two different office spaces, the two businesses can share one.
They can combine their marketing efforts, and if you restructure after the merger, you might be able to reduce your staffing.
Saving money means that you can offer your customers lower prices. This will bring you both new clients.
Access to More Talent
If you work within a niche industry, there may only be a select number of people that know how to use your systems. If they’re all working for your competition, you’ll be out of luck.
That’s where merging comes in handy. Joining another business will give you access to more talent.
Fulfill Customer Needs
Let’s say that you’re a cell phone carrier. If you acquire a company that’s within the same industry, your customers will be able to enjoy having a wider network.
Having more coverage is as good a reason as any to stick with a business. Again, mergers often allow businesses to save money. If you’re able to lower a customer’s bill thanks to that, they’ll be more likely to stick by you because your service is cheaper than others.
When you merge with another company, you’ll be able to combine departments. For example, instead of both businesses needing two separate marketing teams, you’ll now only need one.
When the best people from both teams put their heads together, there’s no telling what they’ll be able to come up with to help with growing a business.
More Financial Power
When two companies merge, their revenue grows because the cost to produce and distribute their goods decreases.
The higher a business’s revenue, the more financial power they have. They’re more likely to obtain credit and impress investors.
If there comes a time when one of the businesses involved in the merger needs to apply for a loan to keep their cash flow steady, they’ll be able to get approved without a problem.
Are There Any Cons?
Of course, nothing good comes without a few cons. This also applies to company mergers.
Two companies mean two very different company cultures. If yours doesn’t mesh well with your partner, managing your employees will become impossible. The whiplash may be enough to cause you to lose good workers.
Speaking of losing workers, as stated above, merging will allow you to get rid of redundant job positions. Employees will get a sense that this is coming before it does. They may begin job hunting in anticipation of their position being cut.
Those that don’t outright leave will feel less motivated to do their jobs because they’re anxious about the future of the company.
Depending on how many debts you and the business you join with have, it could increase your liabilities. That would negate all of the benefits that you would have received by merging.
Everything You Need to Know About Mergers
If you’re having an issue with cash flow or you can’t stay ahead of your competitors, you may benefit from company mergers.
By fusing with another business within your industry, you’ll have access to a larger talent pool, you’ll save money, you’ll reach a wider market, and you’ll be able to better serve your customers.
For more tips that will help you keep your company afloat, visit the Business section of our blog.