One of the most complicated small business decisions you may have to make is whether to merge your business with another. A merger requires a great deal of thought about the complexities involved.
There is no real one-size-fits-all formula. The most successful mergers start when companies look to increase market share and strengthen resources—not to save a struggling enterprise—so it’s beneficial to look at a potential merger as an improvement rather than a saving grace.
Advantages of Merging
Merging with another company brings along its customer base, which can increase your business. Merging is a way to encourage growth, you can look at it as a way to open up new channels and new markets.
For example, if you’re a technology company looking to reach out to a consumer market, it would be smart to merge with a software company because your services complement each other, and you would automatically have direct access to a new market and already established customer base.
Merging can be a great business venture for strengthening a part of your company that is weak, but don’t count on a merger to save two failing companies. If both companies are broke, chances are they won’t make it together.
How to merge smoothly
Although merging your business with another can be a good opportunity to grow, that doesn’t mean it will be easy. A merge integrates culture, technology and people. Making it work after the fact is where the real skill is.
Here are some tips for facilitating the merge:
Focus on core values
It’s important to make sure your values are aligned before joining. One business might be philanthropic and one might be mercenary, but they must have the same core values when merging in order to achieve the same goals.
Keep lines of communication open
When it comes to employees, treat the merge almost like a marriage. You’re bringing together different backgrounds and histories, so there has to be constant communication to make sure everyone’s voice is being heard and no one feels slighted. Put all goals, boundaries and expectations in writing to guarantee everyone is on the same page.
Keep job roles as consistent as possible
Role changes need to really stay as closely related as possible to what employees were doing before the merger unless an opportunity opens in an area where an employee has the opportunity to do something they are really passionate about. You want people to excel with a merger and a completely new role could set up for that employee’s failure.
Encourage team cohesiveness
A merger is going to be successful based on how you treat the employees. To help the new team work well together, have a social event or a team-building session in the early stages of the merge. It will allow everyone to get to know each other better, which makes for better teamwork.
When preparing for a merge, insuring the right people are there to guide you is critical. Finding the right bankers, and the right people is something I always advise to my clients. Do your homework, take your time and make sure your lawyers and business advisors are with you every step of the way.
Michael Wagman’s extensive experience includes audit and accounting, tax, estate, family and succession planning, corporate finance and business advisory services for an array of owner-managed businesses. His industry specialties include real estate and construction, distribution, manufacturing and technology. Michael’s portfolio also includes several public companies and mortgage investment corporations. Michael is a member of the Canadian Tax Foundation and the Society of Trust and Estate Practitioners.
