A merger is a business operation that unites two or more existing business entities into one. In doing so, the existing businesses lose their identity and take up that of the new one being formed. The management and the scope of operations of the existing businesses may change when companies merge with the workers required to promote the agenda of the newly formed entity rather than the previous ones. Other things that change include the shareholding of the members and to make sure that a company is getting the best deal in a merger, it is advisable for firms to seek the best legal representation. A good lawyer will explain to you the legal implications of getting into such a deal and represent you in the negotiations so as to ensure that you getting the best from the merger. Firms in Hawaii that are looking to merge can seek the services of Hawaii business attorney for the best legal representation.
The top reasons companies merge.
Companies merge for various reasons. Some do it enhance the scope of their operations while some do it simply to remain afloat. Either way, mergers are a key component of the present day marketplace and this piece examines some of the reasons businesses merge.
- Operating economies.
This is one of the main reasons companies merge. When two or more firms merge, the operating economies are greatly reduced. Duplicate operations in critical departments within the firms are eliminated or are handled competently through superior management practices. This results in cost savings and the amalgamated firm is able to realize even higher profits. By combining departments into one, the new firm is able to get rid of duplicate workers that cost an arm and a leg to maintain on the payroll. This, in the long run, reduces the cost of doing business.
- Investment diversification.
Companies merge so as to diversify their products and service offering. When two companies in different industries merge, they diversify their offerings and their market reach is enhanced as a result. Firms are exposed to greater risks when their offerings lie in one particular industry and mergers help spread and reduce the extent of the risks that a firm is exposed to. Firms are also able to increase their market share and this allows them greater control of the market.
Firms are able to increase their capabilities when they merge. The capabilities arise from expanded research opportunities and robust manufacturing operations brought about by the merger. The companies are also able to leverage the costs associated with research, development, and manufacturing and this results in cost savings that improve the amalgamated firm’s bottom line.
Sometimes companies merge simply to remain afloat. A poorly performing firm can opt to merge with another that is well off so as remain afloat. They may be forced to lose their identity but this is better than being written off completely.
Companies choose to merge for various reasons. They could be doing it for growth or survival but either way, mergers are here to stay and firms would be wise to seek legal representation so as to protect their interests.