2018-01-31 00:00:00Business InsightsEnglishUnderstand what a merger is and what consequences you must deal with when merging two companies. Learn about the steps you need to take to...https://quickbooks.intuit.com/ca/resources/ca_qrc/uploads/2018/02/Two-Business-Owners-Discussing-Merger.jpgSmall Business Terms: What Is a Merger?

Small Business Terms: What Is a Merger?

1 min read

A merger is a legal agreement between two already-existing companies that unites them voluntarily as one company. Typically, companies that merge are of approximately similar sizes (as opposed to takeovers, in which two companies become one because the larger company subsumes the smaller one). Mergers are done primarily to increase the market share of the combined company. A post-merger company also often benefits from being able to expand operations to new territories while reducing operational costs.

Merging two companies can be a complex transaction, and it’s one that has consequences to the new company, both internally and externally. You’re likely to find that the merger leaves you with duplication of employees, and you may have some difficult decisions to make regarding whom to keep and whom to let go. In addition, mergers require a great deal of paperwork, including updating registrations, licences, tax information, and other public records. You also have to choose under which name the company will operate and may have to create new signage, stationery, and even bank accounts.

Externally, your new company must reach out to the existing customers and clients of both companies to reassure them that you’ll continue to provide the same quality of service and products that they’re accustomed to. A merger is a delicate time where customer loyalty and engagement are concerned, so put extra effort into retaining your existing customer base. You also need to reach out to your vendors, suppliers, and independent contractors to keep inventory, equipment, and supplies flowing smoothly and to arrange for a seamless shift in payment processing. Although merging two small businesses can be complex, planning for all contingencies and staying in contact with everyone affected can make a merger a smooth success.

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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