What is a Business Merger?

MergerBusiness is often seen as an adversarial activity, one where everyone competes for a slice of the economic pie. But sometimes you don’t want to beat the competition, you want to join them. Or, at the very least, you want to acquire their assets and resources to increase your own company’s growth potential. That’s when you start looking at the possibility of a merger.

A merger, as the name implies, is a process by which two companies “merge” together to become one single entity. Typically, these companies will be in the same, or similar, industries, allowing them to combine their operations. The new business formed by the merger will have all the assets, resources and personnel that the pre-merger companies had, although that does mean that a merged business will likely need to eliminate redundant personnel and restructure to handle differences in how the companies operated previously.

The primary reason to perform a merger is simple: the combined larger company will have greater market dominance, and thus greater profit potential, than the two smaller companies that compose it. This can allow the company to raise its prices with less fear of being undercut by a competitor, as well as invest more into itself for greater returns later. It will also effectively create an instant boost in their market share since they are no longer competing against each other.

However, a merger isn’t a simple or easy process. Aside from needing to restructure to accommodate the new expansion, as well as to remove costly redundancies, there is the basic question as to who will be in control of the new company. Depending on how the two constituent companies were structured, shareholders, directors, and executives might all have a say in how the merger happens, and what will happen to their positions and stakes after the merger. Additionally, creditors will have a say, as a merged company inherits both the pre-merger companies’ debts and liabilities, on top of their assets.

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.

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