Scaling up usually comes down to a choice: combine with another business, or buy one.
They are not the same decision. A merger means shared control and a negotiation about whose way of doing things survives. An acquisition means you decide, and you carry the risk.
Here is what each route involves and how to work out which suits your situation.
Mergers and acquisitions demystified
First things first, let’s look at the key qualities of mergers and acquisitions and the differences between these two kinds of M&A processes.
Mergers
A merger occurs when two businesses decide to unify and become a new conjoined entity under a new ownership and management structure, and often with a new name.
This M&A process does not require the exchange of funds and it’s particularly suited to blending two businesses of a similar size and product lines. By joining forces, both businesses can expand and solidify their market share, and combine their talent to create new products while simultaneously cutting costs.
Acquisitions
An acquisition is sometimes assumed to be a more aggressive M&A process, as it involves one company buying another and assuming ownership. However, the truth is that an acquisition can benefit both businesses, not just the buyer, although the buyer will technically be the one calling the shots as they will usually hold majority shares.
There are two main types of acquisition – shares and assets.
A shares acquisition involves the buyer purchasing more than half of their target’s shares, to assume ownership and control. An asset acquisition involves – as you may expect – the purchase of assets, which can consist of both physical and intellectual property.
How to decide which is best for you
Now you know what each type of M&A activity involves, it’s time to work if a merger or acquisition – if any – is the right choice for your business.
So, what benefits can they bring you?
A merger is ideal for companies who want to grow their market outreach and resources without having to spend significant amounts of money – or any money whatsoever. As a result, if there is a target you feel you would work well with – and if they’re amenable to joining forces – then a merger could be the ideal way to scale up while reducing operational costs.
On the other hand, if you are capable of financing an acquisition, then you may prefer this route to expansion – especially as mergers can be somewhat complex to negotiate and set in motion.
Acquiring another business gives your company control of valuable new talent, assets and an established consumer base, which will hopefully lead to a significant increase in revenue in the coming years.
Why hire a business broker
Whether you are leaning more toward a merger or an acquisition, either way it may be in your best interests to hire a business broker.
Business brokers can provide invaluable assistance at every stage of the M&A process, from reaching out to potential targets to ensuring total confidentiality and assisting with negotiations.
This level of comprehensive support can be very beneficial, especially if you are new to the M&A world.
Decided to acquire? Here’s how we can help
If you’ve decided that an acquisition would be in your best interests as opposed to a merger, then why not get in touch with our friendly and experienced team? We can oversee the entire acquisition process from start to finish, maximising value while minimising obstacles, paving the way to stress-free deal completion.
What’s more, we currently offer an exclusive Acquisition Finder pilot which includes a 30-day money-back guarantee for your peace of mind – it’s a win/win situation!
