What Is a Business Merger?The best way to define a merger is to compare it to other business terms that are frequently confused with the concept of a merger: - Merger - this occurs when two separate corporations come together to form a new unified corporation. What this means is that the two separate corporations cease to exist and fold all of their assets and liabilities into a newly created corporation.
- Takeover - this occurs when one company simply buys another. This is different from a merger because a new corporation is not formed since the acquiring corporation still exists.
- Partnership - a business that is co-owned by a group of individuals. It is different than a merger because a partnership is leally not a single entity but rather a group of individuals.
- Joint Venture - this occurs when two business form a contractual agreement to work on a particular business project for the profit of both businesses. This is unlike a merger because it is only a temporary agreement for a specific purpose.
- Strategic Alliance - this is a partnership between two businesses to accomplish an ongoing goal, such as purchasing or producing a certain product at minimum cost to both companies. This is different from a merger because while the companies are working together, they still always legally remain two separate entities.
Why Would I Want to Merge My Business with Another Business?
One thing you should keep in mind is that most of the time mergers are essentially acquisitions. One business will usually be buying the other business and then the two will combine to form a new business model. That means when you are talking about the advantages of a merger, you are essentially talking about the advantages of an acquisition. For a small business trying to grow, IPOs may not always be the solution¿especially in an erratic market. A small business may instead put itself up for sale because being acquired could potentially be a lucrative long-term growth strategy. For a business trying to enter into a new market, acquiring another business to merge with in that market can be a cheap alternative to a costly solo change in business strategy. Many businesses that are substantial in size chose to strengthen themselves by diversifying their product line, and many times acquiring and merging with other businesses is the way to do that. Should I Consult a Business Attorney when Seeking to Merge with Another Business?There are many complexities and legal formalities to conducting mergers and acquisitions between businesses. If you own a business and are considering merging with another business, you will most likely want to consult a business attorney with experience in acquisitions and mergers. Your attorney will let you know what kind of rules and regulations you must follow in the process, and make sure your interests are represented in any written contracts and other legal forms. |
