A business merger is a corporate agreement between two or more businesses to combine operations into a single entity. It is a strategic move that can benefit both companies by enhancing expertise, increasing profits, expanding market share and reducing redundancy. There are many reasons for a company to merge: increased competition, the need to operate more efficiently, or to strengthen its position ahead of a potential sale or investment.
Horizontal mergers are common, wherein companies in the same industry or market combine to reduce competition, gain entry into new markets and realize economies of scale. However, the risk of losing customers can be high if cultural integration is not handled well.
Vertical acquisitions are less common but are useful for building a niche in a specific market or acquiring valuable assets or technology. There are several methods of valuing a business for M&A purposes, including liquidation, book value and market capitalization.
When it comes to a business merger, it’s important for the owners of both companies to understand what they want out of the deal. Whether it’s control, brand identity or board seats, knowing what is non-negotiable and where they can flex can make the M&A process much smoother. Having an experienced Milwaukee M&A attorney on hand can help with negotiations and ensuring the deal is in the best interest of both parties. Having a knowledgeable investment banker on board can also ensure that the terms of the deal are legally sound and the tax implications are optimized.