You may often hear the terms “merger” and “acquisition” said in the same breath, however, the two could not be more different.
A merger between two UK companies works in a number of different ways to an acquisition.
Joining forces with another small business can be in the best interests of both parties, but it does present its own set of unique challenges.
Two companies that are in the process of merging as equal partners are faced with a series of delicate processes to manage.
Therefore, it is not uncommon for one company in a merger to be the junior partner.
In this article, we’ll be looking at some important questions you need to ask yourself before going ahead with a merger.
Why are you doing this?
Having clear and defined reasons for wanting to merge, along with a set of goals. will stand you in good stead.
However, to get a clear picture of the above means having in-depth discussions with the other company, to flesh out your vision and to make sure it is fully aligned with the other party.
Reasons for wanting to merge are often:
- To scale your business
- Grow your market share
- Elimiate a competitor
- Access expertise or intellectual property
Perhaps the business you want to merge with has systems or distribution channels that you think would benefit your business.
Is your business ready to merge?
You must ensure that your business has the financial stability needed to merge with another business.
Getting the correct advice at the right time will ensure that you can determine whether your business has the liquidity and robustness needed to carry out the deal.
Both parties should also do their legal and financial due diligence to test the fit of the merger and eliminate risks.
Due diligence covers many areas of the business, including company accounts, sales figures, legal obligations, regulatory issues, employee and HR issues.
Getting the right advice on any of the issues above can save you time and difficulties if the merger goes wrong.
Are you considering an SME merger? Contact us today for advice.