When owning a business, you can be faced with many tough decisions to help better your company. One of those decisions may be whether it’s the right time to merge your company with another. Knowing if a merger or acquisition is the best move for your business can be challenging, so we’ve put together the main reasons why businesses chose to merge with one another.
Grow Market Share
You can grow your business quickly, and potentially with little effort, by merging with another company. By entering into a horizontal merger, you can easily grow your market share by purchasing a competitor’s business. This is especially useful if the competitor has other products that are doing well on the market that you would like to offer. You can obtain their loyal customers and have more production power.
Diversify
By diversifying your company through a merger, you can reduce your exposure to the risk of being invested in only one industry. The goal would be to buy another company in a complementary, but different, industry or market sector. By doing this you avoid having all your eggs in one basket, and you can widen your performance margin.
Vertical Merger
To improve your company’s profit margin, you may want to consider buying out one of your suppliers. This can help you cut the margin costs that they add to your bill. Another option would be buying out your distributor to cut down your shipment costs.
Improve Performance
If two companies can merge and create more revenue than either was able to make on their own, or streamline processes to reduce costs, it’s considered a synergic merger. This method can improve the financial performance for the company’s shareholders.
Enter Foreign Markets
It may also be beneficial to merge with firms in other countries. This can help protect you from risk in a time of recession in your country. Plus, it can reduce your foreign exchange risk if you wish to sell your products to other regions or countries.
Access to Financing
Sometimes your growth becomes stunted because you don’t have access to debt and equity financing. If you can merge with a larger business that has better access to resources, you will have more access to debt and equity than you had before.
If you’re ready to grow your company and improve the strength of your profit margin for your stakeholders, a merger may be right for you. Consider seeking professional assistance in conducting important research and underwriting. A financial advisor from The Beacon Group of Assante Financial Management Ltd. can help you make a better-informed decision that is right for your business now and in the future.
