When you acquire a business, what goals are you setting for yourself as an entrepreneur? Do you intend to keep those acquired businesses separate? Or, will you merge them?
One company may be burnt out or need an upgrade in business practices — it will have strengths, too, such as strong marketing, processes, people or products. When you purchase two companies in the same or similar industries, they are easier to merge. When companies differ vastly in their branding, services, culture and otherwise, it may make sense to keep the businesses separate.
However, much goes into the deliberation process. Merging two companies brings about significant cultural challenges. One advantage to this is knowing that merging the two will take time just as acquiring a business takes time. So, proper planning during due diligence will help you evaluate the pros and cons.
One Company Will No Longer Exist
When you merge two companies, one company will no longer exist under its original name or as a subsidiary of the acquiring business.
The corporation typically gets dissolved, and the name is changed to that of the surviving company which gains locations, talent and assets. The buyer would eliminate any excess corporate functions, such as a doubling of accountants, marketing teams, managers or IT.
Absorb the company, if the cons outweigh keeping that company functional as its own brand. It then becomes easier to grow that business as a part of the surviving company.
Both Brands Live On
In some mergers, both entities will merge, but both brands and locations survive this transition. If one company has a strong following, why drastically change what works and risk alienating those customers?
That does not mean that a merger is out of the question. Also, the acquisition of a smaller company by a larger corporation does not mean the smaller brand will dissolve.
The corporations can marry corporate functions while maintaining separate brand names. Furthermore, each name may continue to perform some administrative, marketing and HR functions on their own. You would focus on a long-term integration that preserves the best of both brands.
Neither Company Survives
Other cases may necessitate that neither company survives. Both companies agree that merging their assets under a fresh entity and new name is for the best. Usually, both companies have their own set of cons that are not beneficial to the continuance of either company
A fresh start also means starting from scratch in one sense, but it is also important to remember that anew name does not erase the history of either company’s existence.
The two struggling companies have a better chance of surviving as a new entity. This scenario may also occur as a result of two companies’ inability to decide which company will not continue on. If these companies continue to disagree, no one wins. No one thrives.
Changes Will Happen Regardless
Change brings opportunity for growth and learning, but it can also be terrifying, especially for employees of an acquired business. Keep in mind that once your competitors find out about this shift in business, they will try to take advantage of and acquire your talent and customers.
You must motivate your employees to put their minds and hearts towards the future — that opportunities are on the horizon. Offer up that road map to growth and success. Provide the support and reassurance that the staff of both companies need, and be transparent when the time comes to open up communication channels. Take feedback seriously.
Changes will happen with any of these routes, regardless. Leaders, talent and customers will come and go, but you can keep what works well and make it better. Should you keep acquired businesses separate or merge them?
The answer comes with weighing the pros and cons, and sometimes forming a new company altogether.That is where due diligence comes into play, and working with an experienced M&A advisory team will help you preserve the best as you move forward.
Contact Sun Acquisitions to assist you with making this vital decision. We have helped businesses with mergers and acquisitions since 1985.