How Business Mergers & Acquisitions Can Foster Growth
There are many ways to grow a business – and why not consider a merger or an acquisition? Since the beginning of time, companies of all sizes, from small family-owned businesses to large corporations whose shares are traded on Wall Street, have experienced growth through mergers and acquisitions.
If you are considering a business merger or acquisition, here are a few things you should consider:
Acquisition vs. Merger
An acquisition is quite different than a merger, and knowing the difference between the two can help you understand which direction to go.
An acquisition involves a situation where one company purchases another and then absorbs it and its operations directly into its own, enjoying savings through the elimination of duplicate effort and overhead. It also allows the acquiring company access to new talent and the ability to shed underperforming personnel.
A merger results in a combination of leadership and resources, where two companies decide to join forces to immediately increase their revenue and market share. Mergers often require less of a need for financing because equity is shared by the owners of the two previously independent businesses – yet shared in a larger company as a direct result of the merger. Rather, capital can be focused on sales, growth and innovation. It might allow a partner to be bought ought as the transaction is completed. Sometimes mergers can present difficulties early on as management has to learn to work together to achieve their common goals.
How to Finance your M&A Related Moves
Financing your merger or acquisition can actually be much easier than raising capital for a business startup because of the presence of ongoing customer relationships, operations, revenues and other tangible and intangible assets (e.g. goodwill). Even so, banks and private lenders that loan businesses money will expect some type of collateral to help reduce their risk in the event their debtor goes into default at some point down the road. Collateral can come in many forms, including things such as accounts receivable, equipment, and real estate. Personal guarantees are usually required, but not always.
Talk to Us about Financing a Business Merger or Acquisition!
Are you ready to foster growth by acquiring a competitor or joining forces with another business? Contact us at Wexum to learn more about your financing opportunities.