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Understand the implications of a merger before agreeing to one

On Behalf of | Jan 13, 2021 | Mergers And Acquisitions |

Owning a small business can present many opportunities. If a Texas company sees success over the years, the owners may find themselves receiving offers to merge with another company or may consider initiating a merger themselves. Of course, for owners who have little to no experience with this type of business move, it is important that they understand what they might be getting into.

First, it is crucial that business owners know that mergers and acquisitions are not the same actions. Some individuals may mistakenly believe that the two terms refer to the same process, but they do not. With a merger, two companies merge to become a new company, but there is typically no buying out of one company or the other. With an acquisition, one company chooses to purchase another company, and essentially, the company that was bought no longer exists.

Though mergers can be beneficial in that they can allow company growth and more available resources, it can mean that the management infrastructure needs to change. In some cases, this part of the merger does not go smoothly, as someone who was in charge of one of the companies may not take kindly to being asked to take a backseat to someone from the other company. As a result, discussing leadership changes is often wise before agreeing to a merger.

It can be difficult to know what business moves would best benefit a company. As always, whenever thinking about major transitions such as a merger, it is wise to consider the legal implications it could have. Fortunately, Texas business owners can explore these options and their potential ramifications with their legal counsel before making any final decisions.

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