The world of mergers and acquisitions can be deeply complex and bewildering, as there are so many critical factors to consider with every transaction. What’s more, unless you have a keen understanding of the legal and financial aspects of the M&A process, you may find yourself plagued by various questions.
One question that many company owners tend to wonder about is whether they can merge their own businesses.
In this concise guide, we’re going to answer the common query “can I merge my own businesses?”. We will also shed some light on the pros and cons of doing so, and how to go ahead with this M&A process if you do decide it’s something you’d like to achieve.
Shall we begin?
Can you merge your own businesses?
The short answer to this question is, yes, you can. There is currently no specific legislation in the UK that prohibits you from doing so.
If you own two or more limited companies, each with their own unique legal identity, you can proceed with merging these businesses – or even creating your own conglomerate, like Warren Buffet’s Berkshire Hathaway (more helpful tips on conglomerates will follow later in the article).
Benefits of merging your businesses
While there are some significant downsides to merging your businesses, which we will explore in a moment, there are also some sizeable advantages to consider.
These include:
1. You could streamline your workload
Perhaps the most obvious benefit of merging your businesses is that it makes the task of managing them simpler. It goes without saying that overseeing two businesses is a lot more work than overseeing one, allowing you to streamline your administrative workload and managerial responsibilities.
2. You can enhance your position in the market
If the two businesses you own have complementary services or products, then combining them via a strategic merger can help you to bolster your service lines and gain a more secure footing in your chosen market.
As a result, not only do you stand to gain more clients and boost your revenue, but you will also be more likely to attract investment.
3. You can optimise your operations
Another substantial benefit of merging your businesses is the ability it provides you to optimise all areas of your operations. By doing so, you will soon find yourself cutting unnecessary costs and getting rid of redundancies, which will leave you with more funds to invest in bolstering your business and attracting new custom.
Downsides of merging your businesses
While you may already be rubbing your hands together in delight at the idea of maximising your companies’ potential by combining them, there are some significant disadvantages to consider first.
1. Your businesses may not be compatible for merging
If your two organisations operate within very different sectors, then there may be no point in merging them as they will not be compatible.
For example, if one of your businesses is a hardware store and the other one is a cosmetics business, there is no way to dovetail their service lines into one appealing package. In this case, it is best to keep running them as two separate businesses.
2. Staff or clients may not be happy with your M&A strategy
Although you own both businesses, your views on a potential merger are not the only ones that have to be taken into consideration. Both your customers and your employees may be disgruntled by the notion of a merger, which could lead to serious problems down the line, such as increased rates of staff turnover, and a potentially catastrophic loss of your individual brands’ reputations.
In short, it’s important that everyone is on board with a proposed merger and their questions and concerns are addressed well beforehand.
3. You need to consider the tax implications
On the surface, merging your companies may seem like an obvious way to simplify everything. However, the truth is that a merger can complicate things further, particularly when it comes to the matter of taxes.
Consequently, it’s important to seek advice from your legal and financial advisors before going ahead, to make sure you don’t end up losing a significant amount of money in the process.
How to merge your businesses – the M&A process involved
If you do decide that the pros of merging outweigh the cons, the good news is that merging two businesses you own is much the same as any other merger – except you won’t need to worry about searching for potential targets or due diligence, as you already have all the facts.
However, you should still follow these elements of the merger process:
- Define your objectives
As with any life-changing decision, it’s important to have some clear goals in place before going ahead, so you understand precisely what you want to achieve by merging your businesses.
Establishing well-defined objectives will provide both you and your team with much-needed clarity as you proceed.
- Enlist professional help
A merger of any kind relies on professional expertise from a team of legal, financial, and corporate advisors. As well as your solicitors and financial experts, you may wish to hire the services of a tried-and-trusted business broker to guide you through the M&A process of merging your businesses. Their knowledge and assistance could prove invaluable as you proceed along this new and exciting – but potentially tricky – path.
- Prepare your shareholders, staff, and customers
While you may be the main owner of your companies, you still need to take into consideration any minority shareholders (which may include your own family members) as well as your staff and the clientele of both businesses.
As mentioned above, keeping everyone in the loop and considering their thoughts and emotions regarding the merger is vital if you want to give it the best possible chance of succeeding.
- Work out the potential costs involved
Although it may seem like merging your organisations is guaranteed to save you money, it’s important to seek financial advice to make sure this will really be the case. You need to be aware of any unforeseen costs or damages, such as loss of brand loyalty, a downturn in productivity, or a sudden spike in employee turnover.
- Decide on a corporate structure
Combining your businesses means creating a new corporate structure. To help you establish the right structure for your newly merged businesses, you will need to seek advice from your tax and legal teams.
For example, it may be that the ideal structure is a ‘NewCo’. On the other hand, you may have to proceed with a purchase of assets, depending on the status of your businesses.
You will also have to work out what the new board will look like and how your management team and employees will be organised. This is a potentially murky area with an increased risk of interpersonal clashes or even staff walk-outs, so it’s important to handle this aspect with great care and diplomacy – and the help of an employment lawyer, who will make sure everyone’s interests are catered to.
- Handle post-merger integration with care
The post-merger integration phase can be complicated and throw up its fair share of obstacles, even if you are the owner of both companies involved.
The truth is that the ramifications of a merger will continue to echo months down the line – possibly even years. That’s why it’s so important to handle the integration with a great deal of care and consideration, to ensure the merging of the two businesses proceeds as smoothly as possible.
This includes ensuring clear and diplomatic communication with your staff, from management level all the way down to entry-level team members. Addressing their fears and concerns is vital to ensure that they are all onboard with the process and understand their roles in the new combined business.
If there is a potential clash between two different company cultures, then it might be a good idea to hire an HR consultant who can help you unify your leadership teams and create a new combined culture that works for everyone involved. The happier and more productive your workforce is, the more successful your merger is likely to be.
M&A strategy – a word on conglomerates
As mentioned above, depending on your unique circumstances, you may wish to consider forming a conglomerate rather than proceeding with a regular merger.
There are some key advantages to creating a conglomerate, such as:
- More growth opportunities
Combining two or more companies into a conglomerate overseen by a parent business means pooled finances, talent, and other essential resources, which can be drawn upon to fuel growth and scale up.
- Increased resilience
Another substantial advantage of creating a conglomerate is the potential it provides to boost your company’s resilience and reduce market risk. However, this benefit will only apply if the conglomerate is managed effectively.
- Reduced costs
Conglomerates benefit not only from diversification but from optimised operations, which, in turn, leads to a reduction in unnecessary costs.
How Harris Acquire can help
Whether you are still pondering if you should go ahead with merging your two companies, or you have decided to progress with this M&A strategy, here at Harris Acquire we have a team of skilled and experienced professionals who can help make it happen. You can rely on our expertise at every stage of the M&A process, ensuring the transaction goes ahead as smoothly as possible.
For more information on how we can help, don’t hesitate to call 01926 757100 or send an email to Hello@harrisacquire.com.
