Is Your Business Growing Slowly?

What do you do to grow your business? Normally, a company would obtain new clients, expand their product/service range, and expand into new geographical location as their resources permit. Anyhow, when a business reached a level where further growth isn’t possible without getting new sources of capital, then it is in the position of increasing risk exposure.

Is the above condition sounds familiar to you? If so, you may consider the chances of merging with another company. Merger means the combination of two formerly separate businesses when both businesses dissolve and fold their assets and liabilities into a newly created third business organization. Both of your business can be comparable to each other or they can be complementary to each other, but in the end, they must become a fully new business with a new nominated leadership, working environment and culture.

Benefits of Merging

The motivation that drives your business to merge with other business might be because you want to extend your geographical location or simply, obtain a large number of new customers. Then, you may need to expand your product/service range into more money-making areas or you may necessitate the capability to fund the expansion of new product/service. Through merging, you may gain access to your partner’s business knowledge and basically, share the development costs and risks of the new business.

However, many businesses who tried to merge up still unsuccessful in the end. That gives us a clue that we need to plan carefully and know our partner’s organization in greater details beforehand.

Choosing Merger Partner

The ideal partner is the one which complement with your business. Their business strengths will counterbalance your weakness and both of the organization will be synergistically stronger than the two organizations independently. When assessing a potential partner, we have to:

-         Do research on their management and decision making style – are they comparable to yours?

-         The organization culture. Is it positive and well-matched with yours?

-         The marketing approach – Is it effective and well targeted?

-         Is their organization technology up to date?

-         What is their risk profile? Do they have many debts, taking too many risks?

The objective of the merger is to keep hold of the strengths and eliminate the weakness of each partner.

Footsteps to merging

Both partners need to identify what are the strengths of each party and what needs to be changed, and then decide on how they will face the upcoming day to day actions as a team. There are a few compulsory steps which merger partners must look at before any merging take place.

-         Both businesses must be honest to each other while informing the other party about their organization. 

-         Perform a SWOT and PESTLE analysis on both organization

-         Nominate on which product/service will be maintained and which will be rejected

-         Prepare a complete model showing how the new business will operate and cooperate

-         Decide on which employees will stay and which will redundant

-         Plan on the management structure and new leadership style

-         Concur on a system of remuneration

-         Pre-negotiate matters of ownership and responsibility

Sacrifice whatever time and finances are necessary before the merging take place and validate all the financial data. If necessary, get a financial and legal guidance before taking place.