Whether you are the one acquiring a company, or transitioning a company to someone else, there are a number of potential benefits available to combining organizations.
Achieve More Together
Mergers and acquisitions, when executed with care, can be beneficial for both parties of the transaction. With alignment between the two companies, both can benefit from the added reach, additional resources, and greater market share that comes from becoming one larger company.
Recruit Stronger Talent
As a larger, combined company, you may attract higher quality talent simply by being seen as a significant player in your industry. Your combined resources may also allow you to compensate talent at higher rates than your competitors.
Experience Less Competition
Some mergers and acquisitions effectively remove competition, which is beneficial to both companies. With less competitors in the market, companies are able to obtain synergies and experience greater growth that comes with a larger market share.
Enter New Markets
Entering a new market can be challenging, especially if you’re starting from the ground up. Acquisitions or mergers between companies that operate in two separate markets (either geographically or demographically) can speed up that process by leveraging the target’s existing presence in the targeted new market.
Create a Smart Succession Plan
As owner-operators enter their retirement, the question of what will happen to their business is bound to arise. Merging or being acquired by another company can facilitate a succession plan and allow owner-operators time to transition their business in a way that ensures the business remains a going-concern after their exit.
Get Started with a New Offering with Less Start-Up Time
If your business has been considering adding a new product or service, acquiring a business (or merging with one) that has already established this or a similar offering can get you to market faster than starting from scratch.
Make a Smart Long-Term Investment
Some businesses may be undervalued due to swings in the market, temporary setback, or because it’s just getting off the ground. If you see the potential in a business, acquiring it may pay off in the long run when its value bounces back or it continues to the next stage of growth in its life cycle.
Diversify your Business
If your business is focused in an area that is showing signs of becoming obsolete, acquiring or merging with another business can be a smart long-term move that can reduce risk by hedging your revenue streams.
Enhance the Valuation Multiple
Generally, there is less risk associated with larger companies and potentially buyers such as private equity groups are only interested in companies of a certain size. Thus, by combining two businesses into a larger entity, could potentially result in an increased valuation multiple being applied in a future sale.
