Pros and Cons of Merging Businesses

Business valuation tool

Small business valuations are best determined when a business valuation company is hired in order to go through the financials and history of a certain business that is looking to be bought or merged with. A business valuation company has all the necessary small business valuation services in order to obtain the correct data and results so that the purchasing company is able to assess the risk factor involved in the decision making process. If you are considering merging with another company or acquiring one, it is not a decision to be made lightly. There are two main considerations that a business valuation company will implore you to make. The first is financial of course, but the second is personnel. Let’s look a little more closely at each of these factors.

Financial
This is the main function of a business valuation company. They will look into all the financial data that is needed to make the decision but there are other things you should consider as well. These are things you have to answer yourself and an outsourced company will not be able to help with that.

  • These are considerations such as finding out if the company in question is actually going to be helpful in achieving your long term vision for your business.

  • Once the businesses have merged, you’ll need to think about physical space and if you have the room or the finances to become a bigger company. You may have to think about moving to another location which brings into question the lease’s of both original companies.

  • The name of the company has to be thought about to. Whether or not you will merge the names depends on the reputation of the acquired company. Remember that changing the name of your company also costs money.

  • Once you find out the business valuation, you’ll be able to see if one company is more profitable than the other and you’ll need to see how this will impact any profit shares once the two businesses are one large business.

  • Quite often, the first year after a merger can be very difficult and pose a strain on the profits. Productivity tends to drop during this time as everyone tries to get settled in and find their place. These things must be accounted for in order to make it past that first year.

  • If you are going to merge and not completely buy out, you will need to decide who runs the company. A power struggle is not good for finances or personnel.

Personnel
It can be difficult on the existing staff when a new business is brought into the mix. AT times they can feel under appreciated or that they are not enough. They will also worry about their job security and pay cuts, knowing that sometimes these things have to take place. You’ll want to make sure that your staff is full informed on the goings on and nothing is hidden from them in order to ease their state of mind and promote continued productivity.

  • Other than that, you’ll need to appoint leaders and senior staff within the newer, bigger business. If you let your staff know this will be happening before hand, it can give them a chance to dig their heels in and show you what they are capable of if they want the promotion.

  • The senior leaders of the merging company will need to be on the same page as you and agree to how the business is going to be run.

  • Feedback is the best way to find out how things are going in the company and how the moral of your staff are. Ensure that your staff have ample opportunity to provide you with feedback; preferably anonymously.

  • Consistency throughout the company members is a big deal. If one boss is saying one thing and the other something else, the staff will be confused and unsure of their jobs. Make sure that everyone is saying the same thing and giving the same orders.

Of course, there are also risks involved in merging with another company. If you feel the financial risks are worth it, then don’t forget to then take a look at the personnel risks. You’ll want to be prepared in case the merging company makes a power play.

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