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Should my small business consider a merger?

| Nov 13, 2020 | Mergers And Acquisitions |

Merger and acquisition deals can position a business for growth. These decisions are more than just financial, business leaders can use these transactions as part of an overarching business strategy.

Why should a merger or acquisition deal be a part of my business strategy?

A smart merger or acquisition deal can help a business grow into a new market or strengthen its overall performance. If a business is not strong in the online marketplace, it may be wise to consider a deal with a tech business. If you want to expand into a new community, scout out available businesses that are already operating in that area.

How do I move forward with this type of transaction?

Business owners who are serious about a potential merger or acquisition deal need to first narrow down which of these two options is best for their business. A merger will combine the two businesses into a new entity while an acquisition involves one business absorbing another. Once this is decided, the business owner should take the following steps:

  • Determine worth. Get a business valuation to determine the value of the business before moving forward with negotiations.
  • Put together documents. It can be helpful for business owners to draft a merger or acquisition agreement before reaching out to negotiate a deal.
  • Prepare for transfer. Know the process. It is likely the transaction will result in a need to register the changes with state authorities where the business operates. Local regulations may also require additional permitting to continue operations. The United States Small Business Administration acknowledges the process can be complex and recommends business owners reach out to legal counsel for guidance.

Every deal is different, as business needs vary depending on the structure and goals of each business. Although the above provides a rough guideline, the particulars will vary depending on the details of each transaction.