Business owners often share the same goal, which is continually growing their companies. This growth can happen in a variety of ways. For instance, a business can grow through either a merger or acquisition. Here is why business mergers may be a path your company might want to pursue.
Difference Between Mergers and Acquisitions
First of all, it is important to know the primary distinction between a merger and acquisition. Basically, a merger is when two separate companies join together while still keeping their own company names. One benefit of a merger is that companies can share their resources with each other.
An acquisition is when a business purchases another company and has complete control over it. This means that the purchased company loses its name and separate identity. Instead, the newly purchased company becomes part of the existing business. Having the additional revenue is how many businesses keep fueling their growth.
Benefits of Mergers
There are several benefits of business mergers. One advantage is that you can gain access to a new market. For instance, if your business wants to target a new area or part of town, then you may want to partner with a similar business that is already established in the vicinity. This can often be a cheaper alternative to building a new location and hiring new employees.
Another benefit of a merger is that you will be able to further your product development. Small businesses don’t usually have the resources or finances to spend on research. Not to mention product development is a big risk. However, by merging with a larger company, a small business will be able to gain access to top-notch research. This extra research and funds will help the smaller business develop new products.
Finally, a business merger will bring financial stability to your company. When the two different companies join together they will create a stronger financial base. Having a stronger financial reputation will make it easier to obtain loans that can grow your business.
As you can see, there are countless benefits of business mergers. The primary reason businesses embark into a merger is to continue their overall growth. Partnering with another business can provide you with added resources, extra revenue and new target markets. If you are unsure of whether a merge or acquisition is right for you, then take your time conducting the research and potential long-term benefits. It is important to not rush into any big business decision.