Business Mergers: Things to Know Before Merging Small Businesses

Small business mergers and acquisitions, if done properly, can create a larger combined company capable of unparalleled growth. However, if not accomplished correctly, attempts at merging can cause nothing but grief for both parties. Here are some things to keep in mind before you commit to merging small businesses.

Understand Your Motivation

Because small business mergers expend a considerable amount of time and finances and are fraught with potential problems, it is imperative to have a clear idea of why you are performing the merger at this time. Delineate exactly what you hope to accomplish before you proceed.

Consider the Details

Picture how the two companies would operate when combined while working out details of the business merger. Factors to consider include retention of existing contracts and personnel, protection of key assets, and compatibility of products and services.

Compare Company Cultures

Business mergers involve integration of personnel from disparate companies, so it is important that the respective cultures are compatible enough to successfully blend. Attempting to merge two small businesses with profoundly different cultures has the potential to cause grave difficulties. For the merger to succeed, relationships between employees of the two companies must be strong.

Seek Professional Advice

Before taking formal steps toward a business merger, obtain accounting and legal assistance from professionals. The specific language of any agreements such as letters of intent and nondisclosure provisions must be precise to avoid ambiguities in the event of a parting of the ways. Additionally, be sure to attend to details such as employee contracts, re-registration of vehicles, and transfers of licenses and permits.

Plan an Exit Strategy

You may have the utmost confidence that this business merger can provide the stimulus needed for increased company growth, but you should also be aware of and plan for the possibility of failure. Consider a trial period of working side by side with the other company before you finalize your agreement. Have contingency plans in place in case the merger proves to be unprofitable.

For more advice on small business mergers, contact Growth Lending Group.

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