A lot of people get a bad feeling about mergers. Perhaps they think about big companies merging to grow their vast corporate empires. Or maybe they connect mergers to the idea of failure.
Yes, some mergers do fail. And major corporate mergers can have a big effect on consumers.
But the truth is that mergers aren’t all bad. In fact, a successful merger can be a powerful tool to help your business profit in the short term and survive in the long term.
Think of a merger like you would a business loan. If you merge for the right reasons, you can help your company become more successful than it would be on its own.
So, why should you merge? We’ve put together these six reasons to merge your company. Think of it as a little help for setting your 2022 leadership resolutions.
1. Quickly Grow Your Company
Even the biggest companies began as small businesses. Growth and change come gradually for most, and that’s a good thing.
But what should you do when a once-in-a-lifetime opportunity comes along, and taking advantage of it means growing your business quickly? It happens more often than you think. As people began to adjust to the new reality of the COVID-19 pandemic in 2020, consumer demand quickly shifted to products and services revolving around remote working and home delivery. It was a great opportunity for companies that offered these products and services, but the problem was that they simply couldn’t grow quickly enough to meet demand.
One way to expand quickly is through a merger. When the deal is signed, your company can double in size — literally overnight. What’s even better is that the new workforce will already know the industry and have the basic training they need to get the job done.
When a great business opportunity comes along, take it. And if your company doesn’t have the resources to make the most of the opportunity, consider a merger.
2. Expand Your Market Reach
It’s natural for business owners to expand their markets. New markets mean new opportunities to grow your customer base and your revenue. That said, expanding your market reach is easier said than done, especially if the expansion involves new geographic regions. It can take years to build the right team, understand the new customer base, and develop a good reputation and brand.
If all that sounds like a lot of hard work, you’re right. It’s not that there’s something wrong with hard work, but it’s always better to work smarter, not harder.
Instead of starting from the ground up in a new market, why not merge with a company that’s already established? A market-extension merger can help you quickly establish yourself and skip over the most challenging parts of growing a business.
When you want to venture into new markets, mergers are the best way to minimize time and maximize your chances of success.
3. Save on Taxes
Generating tons of revenue is a great thing, but it also means more taxes to pay. If your company is doing well and wants to lower its tax bill, consider merging with another company that has significant carry forward tax losses. After the merger, you’ll be able to take advantage of those losses and reduce the total tax liability of the new company.
4. Take Control of Your Supply Chain
The year 2021 has been the year of the disrupted supply chain. Businesses around the world appreciate how fragile the global supply chain really is as they struggle to get the basic supplies, tools, and components they need.
But instead of fighting to get the attention of their suppliers and vendors, some business owners are trying a smarter idea: Why not directly take control of supply with a merger? Your business can enjoy preferred or even exclusive access to the supplies it needs to deliver its products and services.
A merger between two businesses that operate along the same supply chain line is called a vertical merger.
5. Reduce the Competition
It’s simple math: the more competitors there are, the more pressure there’ll be on keeping prices low. That’s great for the consumer, but business owners in saturated markets know how hard that can be on setting a healthy profit margin and keeping the business afloat. Businesses that directly compete with each other often combine to form a single new company. This is known as a horizontal merger.
After a merger with a competitor, there’s one less player on the field. Between the reduced competition and the cost savings from combining operations, a merger can help save two businesses that would have both failed if they hadn’t joined forces.
It’s not always just about merging with the “enemy.” Often, two companies combine to counter a third competitor that’s a threat to both. Only through a merger are both companies strong enough to take on the new competition.
6. Keep Your Company in Good Hands
Looking forward to retirement soon? Many small business owners are interested in selling their businesses when they retire but don’t want to see their companies fall into the wrong hands. They want to make sure that local employees can keep their jobs and that there’s a future for the business they worked so hard to build. By merging your company with a competitor, it’s more likely that the new management will understand the business and keep things running well. Your company’s merger agreement can also arrange for you to gradually stop running the business to ease the transition for everyone.
A merger can offer the perfect solution — a chance for you to cash out and enjoy a well-earned retirement while ensuring that your employees are protected and that your business will thrive.
Merge into 2022 by Doing What’s Right for Your Business
As you start a new year, take a moment to think about where you want your business to go this year. Can a merger help get you there? At Confie, we’re proud of our commitment to helping business owners make the right choices and become true leaders in the workplace. We value people and culture above everything. Learn more about us by getting in touch, visiting one of our locations, or giving us a call at (714) 252 2500.