Business mergers, sometimes called M&As (Mergers & Acquisitions), involve the consolidation of two or more companies into a single new entity. A business can merge to gain access to a larger market, reduce operational costs, or to create a more competitive brand.
In a business merger, the assets and liabilities of both businesses are combined into a single legal entity. The new company often discards the legacy names and adopts a completely new name. This process can lead to ongoing detailed choices, however, on what divisional, product and service brands to keep, a topic covered by the practice of brand architecture.
The most common way for a small business to consolidate is to purchase another business. An acquiring business can be either a smaller business or a larger corporation. It can pay for the purchased company in cash or by issuing a large proportion of its own shares to the acquired company’s shareholders, who become owners of the acquiring company.
When considering a business merger, it is important to research anticipated revenue synergies and cost savings. It is also essential to determine what size company can be acquired without straining the acquiring organization’s resources and capital. In addition, a merger should be viewed as a long-term strategic business initiative that will yield a return on investment in the form of increased profitability. This can be achieved by implementing a well-executed plan that focuses on the integration of cultural aspects as well as financial and operational goals.
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