Competition in business can be fierce. That’s why some companies choose to combine forces via a merger. A merger occurs when one company (generally the larger company) acquires another to form a new single entity.
This approach has numerous potential benefits as described below.
Reducing competition
Prior to the merger, the two companies may have been competing against one another. Essentially, they were taking each other’s clients. A merger can prevent this as the businesses no longer operate as rivals. What this means is reduced competition and the potential for the new entity to go after a larger share of the market.
Increasing efficiency
The new entity, after a merger, can be more efficient in several ways. Firstly, the two companies can combine talented team members. The business can also share resources such as office space, stock, materials, storage, vehicles, computers and much more.
Typically, the larger the entity, the more bargaining power. This means that the new entity may be able to reduce prices on supplies due to ordering in bulk. Vendors tend to act quickly when it comes to satisfying the needs of larger clients.
Increased financial security
Many businesses opt to pursue a merger because they are in financial trouble. A merger can save a company that may have been struggling financially but still has a lot to offer.
Pursuing a merger is a major step, and it requires careful consideration, as a poorly executed merger could lead to failure or lawsuits. Before making a commitment, it’s important to explore all of your legal rights and obligations.