A business merger is when two separate legal entities come together to form one joint company. It’s often a big step for companies, especially start-ups, to consider and it isn’t something that happens overnight. There are several key steps that need to be taken before the company is ready for a business merger, including a thorough financial audit and company valuation, and a careful review of the culture, structure and reputation of the potential partner.
There are different types of business mergers, such as a horizontal or vertical merger, and it’s important to understand the differences between them before considering a deal. A horizontal merger is a combination of companies that offer similar products, such as T-Mobile and Sprint or Vodafone and Mannesmann. A vertical merger involves companies that are at different stages of production, such as Apple and AuthenTec, which combined their touch-ID sensor technology.
Regardless of the type of business merger, both the company buying into a deal and the company being acquired need to take into consideration the impact on staffing, operations and activities. Both companies need to work out how to integrate their systems and processes, address cultural issues and manage unforeseen costs such as increased regulatory scrutiny or an increase in debt that may not have been considered during the negotiation process. For more insight into the financial implications of business transactions, consider taking a deeper dive with Forage’s Leading with Finance virtual course.
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