In a business merger, two companies form a single, new company with a combined share of stock. Companies merge for a variety of reasons: increasing market share, accessing new customers, adding technology or talent, consolidating supply chains and reducing costs.
Whether you’re considering a merger or consolidation, it’s essential to carefully assess your current situation and resources to ensure the strategic benefits outweigh the challenges of combining companies. Carry out a thorough due diligence process to evaluate the target company’s financial health and corporate culture, assets and liabilities, and intellectual property. Consider the integration capabilities of both parties and whether there is cultural compatibility, especially with respect to leadership.
Then, decide on a structure that meets your goals and objectives – cash or stock, assumption of debt or a combination of all three. Once the deal is executed and closed, you’ll need to transfer ownership according to your agreement and register the new company, which might involve opening new bank accounts and obtaining state and federal tax IDs, or getting a new license depending on industry regulations.
Lastly, ensure the success of your merger by providing transparent communication to employees, investors and customers about what to expect, including any changes to roles or responsibilities. Conduct 3-6 and 12-month evaluations to measure performance and adjust accordingly. With careful planning, strong leadership and governance, a successful merger can lead to significant growth and long-term value.