Implications of the Merger and Acquisition Process
Mergers and acquisitions are a natural part of doing business, particularly for large corporations. However, not all business owners fully understand the process. A merger or acquisition can have a significant effect on the companies involved and it is important that all parties possess solid knowledge of what they are signing up for — including potential risks — before the process commences.
Calibre Business Advisory has comprehensive experience working with companies large and small to provide m&a consulting and assistance. We provide tailored assistance to ensure our clients emerge from proceedings in a positive position, ready to take on new opportunities and challenges.
Why do companies choose to merge and acquire?
There are many reasons why companies enter the merger and acquisition process. The decision to merge with or acquire another company is usually made with an eye to accelerate growth and opportunity.
Some of these reasons include:
Growth
Organic growth usually takes a long period of time. To fast track the rate of a company’s growth, the owners of a business may acquire or merge with another company.
Doing so means that you will have access to increased resources and personnel, enabling you to increase your reach, market share and company value.
Eliminate competition
Competition in business is usually good — unless your competitor is taking a significant portion of your potential customer base.
A simple solution is to acquire or merge with your competitors. By combining forces, you can be confident that you have the ability to take on any challenge that comes your way.
Cost cutting
Running a profitable business is difficult, particularly if you are in charge of a large corporation. Such companies tend to have large overhanging costs and face difficulty when it comes to streamlining operations.
Combining two businesses provides the opportunity to restructure, meaning that resources can be consolidated and costs cut.
Diversifying
From time to time, a business will decide that it wants to expand its service offerings and product portfolio. Doing so can take significant time and resources, unless the business opts to simply acquire another company.
Acquiring or merging with another company for the purpose of diversifying a product line is a smart idea, but also requires substantial planning and assistance that is typically offered by an m&a consulting firm.
Benefits and risks of the mergers and acquisition process
As mentioned, there are both significant benefits and risks associated with the mergers and acquisition process.
The majority of these risks can be circumvented through thorough planning. Before undertaking a merger or acquisition, consider the following potential liabilities:
- Overpayment: Purchasing a business is generally an expensive process. Not only that, but it can be quite difficult to settle on a price that accurately reflects the resources, personnel, and proprietary information that you are paying for.
- Conflict of culture: Just because two businesses operate in the same industry, does not mean they do so via the same ideals and standards. Many mergers and acquisitions have been brought undone through a conflict of culture.
- Failed integration: Even the best laid plans can go astray, which is certainly true when it comes to the merger and acquisition process. Put simply, integration is a complex undertaking and any number of unforeseen problems may crop up when you are combining two businesses.
However, don’t be put off by these risks. If you are looking to expand your business, eliminate your competitors, and diversify your service offerings (as all companies should be), the benefits of merging with or acquiring another company often outweigh the potential negatives.
Calibre Business Advisory — your partner in business growth
Calibre Business Advisory’s team of business advisors and financial professionals have significant experience providing m&a consulting. We understand both the benefits and risks of participating in the mergers and acquisition process and are proud to offer advice tailored to our clients and their situation.
If you are considering a merger or acquisition, contact Calibre Business Advisory today to discover how we can assist your business grow and succeed.