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The basics of a business merger

On Behalf of | Jul 14, 2020 | Banking & Business Transactions

A business has a life cycle. It has a beginning and a potential end, but it can also go through major events that shape how the business looks and operates. One of these events, which is determined to be major, is a merger. The decision to go through a merger impacts all areas of a business, including stakeholders and customers.

What is a merger? In simple terms, it is when two companies combine both their assets and liabilities; however, this process means much more than this. The combination for two businesses means that one business survives while the shares of the other company are converted to shares of the surviving company.

A merger is a business transaction that requires many steps in order for it to be successful. In some cases, a merger may not be a right fit, and is determined early on. Thus, it is important to consider many factors from the moment the idea of merging is made. To begin, it needs to be determined whether the core values of the company will be protected and sustained in the new entity. Additionally, it must be a strategic fit. In other words, it needs to benefit the company, providing the incentive to go through this process.

Although beneficial, a merger can be a complex process. It requires due diligence, the valuation of a business, warranties, asset sales, purchase agreements and other documents and contracts necessary to complete the transaction. Because the transaction can have many working parts and decision to make, it may be helpful to have financial and legal professionals to help aid the process.

Whether a business has considered a merger for some time or was recently presented with the opportunity, it is important that a business considers the ins and outs of the process. This not only helps the process itself but allows a business to gain a better perspective of the process, the concerns they might have and the benefits enjoyed.