A business merger is when two companies combine into one entity. They do so either to grow, diversify or gain access to new markets. It’s important to carefully evaluate both options based on key growth objectives and risk tolerance. Careful planning, cultural compatibility and strong leadership are hallmarks of successful M&A transactions.
A big drawback to merging is increased liability, especially if you’re carrying over debts from the old company. This may impact your ability to get additional credit and limit expansion opportunities in the future. Another challenge can be the loss of employee productivity, as employees are often uncertain what their future will look like.
The good news is that you can prevent layoffs by including a clause requiring the new company to retain current employees where possible. This isn’t always feasible and can be challenging for businesses with limited resources, but it is worth exploring if you want to avoid the worst-case scenario of losing your employees.
Mergers should ideally lead to growth, either through increased revenue streams or operational efficiencies. M&A is also a great way to diversify, which can be beneficial in industries prone to cyclical demand or economic fluctuations. It can also help increase bargaining power with suppliers, customers and competitors. The key is to conduct a thorough due diligence process to assess the target company’s finances, corporate culture, assets and liabilities, and intellectual property. An expert Milwaukee M&A lawyer can help you prepare for the negotiations and find the best deal.