subject: How Mergers And Acquisitions Can Help Small Businesses To Survive [print this page] The terms 'mergers' and 'acquisitions' are frequently used together because they are related; they are not synonymous though. A merger takes place when two businesses mutually agree to combine into one entity whereas an acquisition happens when one business buys another. In both cases two previously distinct business entities become one. Mergers and acquisitions (M&A) are not the preserve of billion-dollar corporations as many people erroneously believe. Even small businesses can benefit tremendously from well executed M&A's done with the help of a business lawyer McKinney TX.
Small businesses will benefit from M&A as a result of the synergies that can be created when two businesses combine. Indeed, one of the greatest motivations for M&A is the cost benefits that accrue as a result.
Thanks to the difficult economic times facing many businesses at present, cutting costs is imperative for survival. When two businesses merge they will be able to achieve economies of scale and which will result in greater outputs and lower capital costs. For instance, if a business that operates 50 outlets merges with another that has 30 outlets the resulting business will have a total of 80 outlets. More cost savings can certainly be accrued by operating the 80 outlets than is possible when running the 50 or 30 separately.
M&A also creates an opportunity for integration, and which happens when a company merges with or acquires its supplier or customer. The resultant company will be much more efficient than the two were separately and the costs of production and overheads will be reduced.
The second way in which small businesses can benefit from M&A is by consolidating an increase in market share. Typically, small businesses struggle to expand their markets especially when the economy is weak. Bigger companies have more money for marketing and can therefore absorb considerable losses when garnering for more market share. Small businesses are often constrained in this regard and hence a most effective way to increase market share can be to merge with another business. The resulting entity will have a bigger market and more resources for more expansion.
Sometimes a small business may have lots of untapped potential and which it cannot actualize because of financial constraints. For instance, one might have a great product and a promising market but be constrained by a lack of money to develop and distribute the product, which is typical of startups. Such a startup can by merging with another business leverage on the latter's infrastructure such as manufacturing, advertising and distribution channels to develop and market the product. A merger is therefore a cheap and fast way of growing a business because business owners do not have to invest in new infrastructure. Mergers do not require a lot of money save for the fees paid to business lawyer McKinney TX for advice and other transaction costs.
Before acceding to a merger or an acquisition a business owner should seek guidance from a competent business lawyer McKinney TX because there are intricacies that the entrepreneur may not be familiar with such as the tax implications of acquisitions. The business lawyer McKinney TX will also help with filling of the required paperwork.
