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What are the pros and cons of a business merger?

On Behalf of | Oct 24, 2023 | Business Transactions |

Maintaining a corporate advantage over competitors isn’t easy. There are numerous options that your company can take, with one of them being a merger.

Essentially, a merger involves two companies joining together to operate as a single entity. This strategy has various pros and cons, as are discussed in more detail below.

The pros of a business merger

Some of the key advantages of a business merger include:

  • Gaining a larger market share – The joining of two commercial forces means that the new entity corners a larger share of the market.
  • Streamlining operations – When two companies merge into one entity, they can pool their resources. This makes for more efficient business operations.
  • Preventing business closure – Often, mergers occur because one company is struggling. The merger gives the people involved with the struggling business a new lease of life and it potentially saves their jobs.

The cons of a business merger

Mergers aren’t always smooth sailing, and there are some potential drawbacks. These include:

  • Gaps in communication – Mergers bring about significant change, and it can be difficult for employees to adapt. The merging companies may have had different cultures and ethics, making for a clash or at least a stiff learning period.
  • Potential loss of jobs – Sometimes a merger is a last resort for a struggling business. One of the key objectives of the new entity may be to cut costs, which could include laying off personnel.

Embarking on a business merger is a significant decision that warrants careful consideration. There are pros and cons to this strategy. Before taking any concrete steps, it is wise to seek legal guidance. We help businesses contemplating a merger, feel free to contact us for a consultation.