A business merger is the consolidation of two or more businesses to form a single entity. While there are a number of different reasons for a business to consider a merger, some of the most common include achieving operational efficiencies, increasing market share, and diversification.
Aside from improving profitability through cost synergies, a merger can also help to boost the company’s reputation and customer retention potential, while allowing it to access new markets, marketing budgets, materials, equipment and more. Additionally, a merger can increase the bargaining power of the combined business with suppliers and customers, as well as improve the negotiating terms for future transactions.
Mergers can take many forms, including a horizontal merger (two competitors), a vertical merger (one supplier merging with one customer), a market-extension merger (two companies that sell the same product in the same market), or a conglomeration merger (two companies with nothing in common joining forces). The type of merger chosen will influence everything from integration planning to governance and shareholder dynamics.
Regardless of the structure, any M&A should be carefully planned and executed to avoid pitfalls. This includes ensuring that all involved parties have complete transparency throughout the process, from leadership to frontline employees. This helps to mitigate staff concerns that can have a knock-on effect on productivity and morale. In addition, it can ensure that projected costs and benefits are realistic. Lastly, it is important to establish a transition team that can provide support as the M&A takes place.