How Mergers and Acquisitions Affect A Company

Starting a company of your own is challenging. Those who are working to get their startup off the ground are working to build and grow their small company into something strong enough to stand on its own, or to become a part of something bigger. Perhaps that means merging with another company later on, or allowing the company to be acquired. There are reasons why a smaller company might want to merge or be acquired, and reasons why the larger company may want it. Either way, mergers and acquisitions should not be taken lightly. They can affect a company in a big way. It can be a risky prospect for all parties, and all should take care and seek advice through a mergers and acquisitions (M&A) consultant. Today we will explore how professional M&A consultants make for smoother transitions.

Reasons for M&A

First, let’s look at why larger companies are interested in acquiring smaller companies. The main reason is growth and speed of growth. The larger company wishes to get bigger and dominate the competition. Merging with other companies is a way for a company to grow much faster than they would if they allowed the growth to happen naturally. In this way, they can also beat out their competition to get the smaller company before the other company does, consolidate all of those resources, and soon become the dominant player in their field. Another reason why companies take over other companies is for income tax purposes; if this means that by acquiring the smaller company, they might be able to move their tax home to another country.

Problems around M&A

Throughout the process, however, an M&A consulting professional should be there to advise and explain some of the problems that larger and smaller companies will face and have to overcome. The biggest problems are around the differences in the culture of the two companies. A team that has built a startup to the point of acquisition has done it as a labour of love, like a parent sending their child off into the world, but the blending may not go as well as hoped. There may be initial loss of spirit and the sense of togetherness as a team. Is there a plan in place to integrate the two companies? If not, it might be hard for the employees of each company to work together and the dominant culture, so to speak, can swallow the acquired company’s heart and soul. This is not likely done on purpose, but by using an M&A consulting advisor, the impacts of the merger can be better understood and avoided.

Impact of M&A

Mergers and acquisitions impact all stakeholders including employees, management, shareholders and the competition.

Job Loss

Once a merger occurs, there may not be a need for the same number of employees or management staff, so there may be layoffs. Changes to procedures and operating environment are inevitable and this could lead to stress and emotional problems on both teams.

Economic Impact

There may be financial benefits for the company that was bought out, as the shareholders could get a beneficial payout; but on the other hand, the acquiring company’s shareholders may assume debts and losses, or have the cost of the purchase of the company. Depending on the type of company, the market and the competition may have changed.

The Burnie Group Can Help

Mergers and acquisitions have a huge effect on the acquiring company, perhaps even more so than for the company acquired. They assume a great deal of risk, they make changes to the markets they work in, and they have impact and effect on their own company when making these investments. If the bottom-line goal is to strengthen their own power, size, and finances through mergers and acquisitions, they must take care to look out for all interests.

Proper advice from an M&A consulting firm like the Burnie Group will make the transaction much smoother.