What to Consider Before Merging With Another Company

What to Consider Before Merging With Another Company

Steps you need to take when merging with another business.

By Marcia Smith

There are several different reasons you may wish to merge with another business. The nature and status of your business, along with your reasons for merging, will help you decide when it’s the right time to merge.

In all cases, you shouldn’t merge until you’ve had the opportunity to define the kind of business you want to merge with. Identify possible candidates and get to know those companies well. You should also make sure your own company is an attractive merger proposition.

Best time to merge

A popular time to merge is when the market is contracting and there is little possibility for growth. In these conditions, pooling resources and diversifying via a merger can help to stabilize and protect businesses and increase profits.

Partnering with a complementary business can be a great strategy, increasing the customer base of both businesses and creating a more attractive combined offer for the consumer. For example, software and hardware manufacturers can team up, or a car dealership might partner with a breakdown service.

Legal contracts

However, choose your partners carefully and protect your interests with a legal agreement. Consider the reputation of your prospective partner and whether your brands are a match in terms of quality and price. Consider how you’ll make sure the partnership is equally beneficial for both sides. A non-compete agreement can also be useful to prevent your partner from diversifying into your business area and stealing your customers.