Are you considering a merger or acquisition?
Every success in your corporation is cause for celebration. Whether these successes exceed your goals or are helping you move toward them, it is likely your shareholders are enjoying the rise in their stock values and the confidence this instills. However, part of the success of any business is expansion, whether through internal or external means. If you are looking to expand, you may also have your eye on a merger with or acquisition of another company.
Mergers and acquisitions can be tricky processes, and there is always the chance of encountering some complication that jeopardizes the project. This might also place your shareholders at risk, and you want to avoid that. Understanding the nuances of mergers and acquisitions is advisable before undertaking this complex capital project.
Knowing the difference
Mergers and acquisitions occur when two companies combine in one of several ways. The difference between a merger and an acquisition generally involves the situation of the other company. If the other company is willingly joining its business with yours to form a new venture, you are involved in a merger. However, if the other company is struggling or the management is resisting your presence, you are probably dealing with an acquisition.
Acquisitions are not often hostile, but sometimes, the stockholders override the management in making a decision about whether to accept the offer to surrender control of the company. If you are considering an acquisition, you are probably looking at a smaller company, one that may be less solvent than yours, or whose management or shareholders believe the move will benefit them in some way.
What’s in it for you?
For your company, some benefits of a merger or acquisition can include:
• Maximizing the value of corporate shares if the combined value is greater than the individual worth of the shares
• Increasing your access to the intellectual property of the other company
• Improving efficiency in the way you operate
• Bringing new production methods from the target company into your operations
• Incorporating desirable talent into your work force
• Freeing up capital to grow your company’s research and development capabilities
Of course, you will want to be aware of some of the common risks of a merger or acquisition. For example, vague terms in your agreement might bring conflict among your managers or incompatibility between the cultures of the two firms. You could also face charges of creating a monopoly if your merger or acquisition generates a corporation that impedes competition or market efficiency. There are many more complex issues to consider, so it is wise to undertake a careful study before moving forward with the project.