Pros & Cons of Merging or Acquiring Another Company

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Thinking about merging or acquiring a business can be an exciting, but also stressful, time for you and your company. Before you make a final decision, be certain to obtain any advice needed from your attorneys, partners and other involved parties.

Pros

  • When one company purchases and takes over another, this is known as an acquisition. A merger, on the other hand, occurs when two companies reorganize themselves into a single new company. Benefits of both types of transactions include the potential increase in the competitiveness, cost-efficiency and stock value of the new enterprise.

Cons

  • Disadvantages of these transactions, however, also exist. If an owner decides to acquire another company, it can be an expensive venture. A significant amount of capital typically must be raised before entering into negotiations. Mergers also come with drawbacks, including the fact that you now have a new co-owner, or owners, with whom you must collaborate.

Considerations

  • Other considerations to think about when making changes to your business include the economic and political climate in which you operate. Determine whether tax or trade laws in your region are friendly toward the types of modifications you want to make. You may come to the conclusion that now is a good time to move forward with the desired alterations or you may elect to wait for circumstances to change in your favor.

References

  • The Truth About Starting a Business; Bruce R. Barringer; 2008
  • Photo Credit this with the company image by Yuriy Rozanov from Fotolia.com
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