If you or your company is interested in buying another company with the intention to merge both entities, there are many considerations that need to be taken into account. The most common reason for a merger is because it creates the opportunity to increase revenue while at the same time making the overhead costs more efficient.
Mergers can lead to substantially increased profits for a company, however this increase can take years. In the short-term, a merger is likely to disrupt office culture and create a great deal of chaos while the changes are being made. When it comes to buying in relation to a merger, there are even more considerations for the buyer.
Have you reviewed the financials?
Before acquiring a company to merge with, you must first diligently look into their financials. It is important to be as cynical as possible when looking at their future projections and to carefully consider the type of financial metrics that they are using.
What is their unique selling point?
Consider also what is unique about the company now and what has staying-power for the future. For example, if they have cutting-edge technology but it is not registered with a patent, then another company might copy them. That means that they could become irrelevant in just a few short years.
Do they have a loyal customer base?
A loyal base can take years to build, so you need to consider the value of the company's customers and how loyal they are.
The steps before embarking on a merger can be very daunting, but they also present an exciting opportunity. Make sure to conduct an in-depth analysis into a company and to seek out as many perspectives as possible.
Source: Forbes, “20 Key Due Diligence Activities In A Merger And Acquisition Transaction,” Richard D. Harroch and David A. Lipkin, accessed Nov. 17, 2017 Posted on Business Law