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2015-07-08 00:00:00How To Run Your BusinessEnglishCompanies decide to merge for a whole host of reasons, the most common of which is to achieve increased growth and profitability. Yet...https://quickbooks.intuit.com/au/resources/au_qrc/uploads/2017/01/Managing-the-merger-of-your-business-with-another.jpghttps://quickbooks.intuit.com/au/resources/how-to-run-your-business/managing-the-merger-of-your-business-with-another/Managing the merger of your business with another

Managing the merger of your business with another

2 min read

Companies decide to merge – or consolidate together to form a new business – for a whole host of reasons, the most common of which is to achieve increased growth and profitability. Yet mergers are complex, so before you take the plunge, ask yourself these five questions.

1. Do you have a clear business strategy?

Those who’ve successfully done it say having a clearly defined business strategy is vital before proceeding with a merger. A business strategy will help you clarify your goals and assess whether or not a merger is the best way forward. There are many ways to achieve business growth, and your strategy will reveal whether merging with another company is the right way forward for your business.

2. Have you done your due diligence?

This may sound obvious, but it’s surprising how many smaller companies in particular fail on this point. Conducting due diligence is time-consuming but essential. At a minimum, it should include reviewing company financials, business history, operations, debts, employee contracts and liabilities, property leases, customer files and other relevant documents.

3. Are the two companies compatible?

Trying to merge businesses that are not culturally compatible can fragment the new organisation and compromise its success. Many merging companies consider running parallel operations for a period of time before the merger progresses – this provides time to confirm that the companies are culturally and operationally compatible and the merger is likely to succeed. Mergers can also fail due to a lack of careful planning, so once you have determined that your companies are a good cultural fit, plan the integration process out in detail. This will give you the best chance of achieving a cohesive and productive business at the end of the merger.

4. Are you keeping your employees informed?

Having your employees behind you can help make a merger successful, yet many companies fail to keep their staff up to date. This creates a climate of fear, where the rumour mill fills the void left by the executive’s lack of transparency. Communicate as clearly and as fully as you can with your employees. Be honest about the process and enlist their support by explaining the benefits of a successful merger to them.

5. Have you sought expert advice?

Mergers are, by their very nature, complicated. To give your merger the best chance of success, make sure you seek the best legal and financial advice you can afford, ahead of committing to any processes or agreements.

Also consider obtaining advice around planning an exit strategy. While no one sets out to achieve a failed merger, the reality is that mergers do not always succeed. It’s prudent to plan an exit strategy, should the merger process sour. The experts you choose to go with can also help you plan for the future and keep on top of growing pains.

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Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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