The Small Business Guide To Mergers and Acquisitions

Many large businesses go through a merger or acquisition at some point, but these days, even small businesses can experience these momentous events. How can you navigate mergers and acquisitions successfully? This guide will go over general information and provide helpful tips that benefit you.

Why Are Mergers and Acquisitions Needed for Small Businesses?

Sometimes, the shortest route from A to B is through a business acquisition. If you’re trying to grow your company’s market and profits, buying out a competitor is a legitimate way to do so. An acquisition can provide valuable customer lists and potentially allow you to keep the other business’s brand name. This can help you build a strong customer base without having to invest years of detailed work.

Another option is a merger. This can be valuable when two businesses discover that they can generate significant profits by partnering up. Perhaps your business has the technical expertise and valuable equipment, whereas the other company has an established reputation and more entrepreneurial experience.

Mergers can also help expand into additional services that you don’t know much about but that provide many benefits for your primary customers. For example, a company dedicated to all types of industrial and commercial cleaning might obtain benefits by merging with an HVAC business that can also service air ducts and refrigeration systems.

How Should You Approach Mergers and Acquisitions?

There are several common obstacles to successful business acquisitions and mergers. Seeing them ahead of time and avoiding them can allow negotiations to continue in a beneficial way for both parties. One of the largest impediments to completing this type of business deal is dishonesty.

It’s OK to protect your business’s secrets with legal documents that outline information sharing, but never lie or exaggerate figures. Even if you think the item isn’t that important, any sign of dishonesty almost always spells doom for a deal. There’s too much at stake to risk being deceived.

Another tip that can help is to put yourself in the other business’s shoes. Know that a good negotiation requires both parties to sacrifice something. Often, what business owners think their company is worth isn’t quite realistic. You may need to be prepared to accept a lower amount than what you initially wanted, at least to receive concessions that are important to you from the other business.

Finally, make sure the goals and values of both organizations are relatively aligned. It’s difficult to negotiate mergers and acquisitions when one business values experienced personnel and the other is only focused on the bottom-line price of equipment and inventory.