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A business merger can be defined as “an agreement that unites two existing companies into one new company. There are several types of mergers and also a number of reasons why companies complete mergers. Mergers and acquisitions are commonly done to expand a company’s reach, into new segments, or gain market share. All of these are done to please shareholders and create value.”
In simpler terms, it is the adjoining of two businesses into a unified company. There may be several reasons why a company chooses to merge. One example would be two different companies joining as one, so they can provide a more integrated service. Another reason can be a smaller company being acquired by a significantly larger one. In this article we discuss the benefits of some mergers and why these should be considered.
Provide a better service
Following the successful implementation of a merger, customers may benefit further if they are provided with additional services. This improves the perceived customer experience and leads to repeat business. Such mergers need to take place in the context that the two entities do not offer competing services, but rather a complementary one, which makes the business a one stop shop for customers.
In the local Maltese market we have had financial services companies such as KPMG and Deloitte merge with solid IT service providers.
Enter new markets
A merger may also lead to opportunities for new market penetration. This includes the acquisition of clients in different countries or geographical areas. An example of this in a local scenario would be a retail company partnering with a small digital marketing consultancy organisation. This would allow it to use digital marketing expertise to sell its products abroad, appealing to a larger market.
Develop new products
Integration with a new company will bring about a fresh set of ideas and different processes. This can allow for better product development and diversification, especially if the company you are merging with has a good budget for research and development.
Resources
If both companies have profitable models, the number of resources combined can create a solid backbone for substantial profit making. In this regard it is not always straightforward, as part of the merger plan would include a company re-structuring process where some people may be placed in different roles, or have their employment terminated.
Before attempting a company merger, you will need to evaluate the feasibility. This includes addressing integration matters, financial prowess and future outlook. If the merger is of mutual benefit for the long-term, this may be an excellent choice for growth
