A business merger can be an exceptional opportunity for any company looking to expand its market presence and its profits. And while it is true that a merger can offer many benefits, it can also come with many potential problems for the unwary. Here are just a few potential problems to watch out for when it comes to mergers.
Considering different kind of mergers
There isn’t just one kind of merger, and each type has its own benefits and drawbacks. In a traditional merger, one company simply becomes a part of another company, preserving the name of one while the other is absorbed. However, there is also an acquisition, where one company becomes a subsidiary of the other, or a consolidation, where a wholly new company is formed from the shared assets and personnel of both companies. In the end, it’s up to each company to determine what sort of merger works best for them and their business needs.
Reconciling different business practices
Different companies run their businesses in different ways, even when they’re in the same industry, and bring their own management styles and policies with them to a merger. An important part of any merger is reconciling these differences in policy to ensure the newly merged entity operates as efficiently as possible, and to avoid potential legal or financial problems that might arise due to employees following the wrong policies.
When two companies merge, they bring all their staff with them into the merger. And while many staff members will be necessary to ensure continued functioning of the newly merged company, there will also necessarily be many staff who are redundant or unnecessary. Restructuring your company after the merger is important to both fill gaps that may exist in your company’s new structure, as well as eliminating unnecessary labor costs from redundant employees.
In the case where one or both companies are corporations, it’s important to ensure that any shareholders in both companies are adequately compensated for the merger and that their interests are preserved. This either means ensuring anyone who held stock in the pre-merger companies receives an equivalent amount of stock in the newly merged company, or compensating them for the deprivation of property, depending on how the merger is structured.
The firm’s attorneys have a wealth of experience representing both buyers and sellers in mergers, acquisitions, and other corporate transactions. If you require legal assistance concerning business startups, formation, corporate acquisitions and mergers, corporate restructuring, or another business matter, call (516) 280-7105 or fill out our contact form for a free consultation.