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Should I Consider or Accept a Merger Offer ?

Guest post by: Stan Prokop

Article Overview: The articles provide insights into the benefits of a merger or joint venture for business owners and financial managers seeking to understand that strategy .

Should I Consider or Accept a Merger Offer ?

In the current economic environment many firms are either proposing, or receiving offers to merge with what may have been competitors or firms in a similar industry.

Do mergers make sense? In many cases they can be a great way to affect a positive turnaround for a firm that has been experience difficulties. It's often a case of simple arithmetic, not high finance: Cost and operating savings make sense! Business owners know that in a merger you don't need two finance departments, two admin departments, two plants, etc.

History probably tells us that the more successful mergers are when two firms have relatively equal footing. The minnow swallowing the whale, or visa versa in business in generally not a good thing. In certain cases both firms could actually be doing only marginally well and the synergies they obtain can make them rise to a higher level of success in their industry. The business owner needs only to ask himself simple question - Do I want to own 100% of money losing marginal operation, or 50% of a successful profitable firm. We'll pick number two any day!

Probably the best way to look at a merger is more of a partnership. One firm dominating the other or having their culture influence the other is not advisable.

What are some reasons for contemplating such a major business decision? There are several. In many cases methods of distribution of sales can be improved, adding profits to the bottom line. One of the firms may have a stronger level of expertise in certain key areas of the business. Banks and other lenders might look more favorably on the combined entity, particularly if the new unit has better financial results!

Another obvious consideration is the issue of sheer size. Two smaller or medium sized firms might now be able to, when combined, take on a larger firm in their market.

When two firms merge that has to be some financial logic applied to the new ownership of the company. The bottom line is that the new valuation has to make sense from the point of view of who contributed what.

Many customers at a certain point in time find them up against the proverbial 'wall '. They can't get the financing they need, there are production or distribution issues, and the overall marker or economy might be particularly tough for their particular industry.

A merger is a much legitimized way of allowing a company to continue to prosper.

Business owners who do not want to take the entire plunge of a real legal merger can also consider a partnership arrangement with another firm. More often than not this is structured around a joint venture - We see more and more Joint Venture press releases every day. There is a nifty term called ' co - opetition ' and more and more firms are realizing that they can keep their own company in tact, not take on total risk in new ventures, but can actually share risk and rewards with a suitable partner firm .

The bottom line is that a merger or joint venture can be a solid opportunity to lower costs and increase sales and market share.

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Article Tags: joint ventures, mergers



Related Forum Posts
Definitions of merger - Mergers can be characterized according to three categories: horizontal mergers, which take place between firms that are actual or potential competitors occupying similar positions in the chain of production; vertical mergers, which take place between firms at different levels in the chain of production (such as between manufacturers and retailers); and other mergers, such as those which take place between unrelated businesses or conglomerates with different types of businesses. Aberdeen Lyle Merger Analysis Large mergers, acquisitions and some other corporate combinations require prior review and approval in some jurisdictions. As part of their review, competition authorities may prohibit mergers or approve them subject to conditions. Mergers are usually only prohibited or subjected to conditions if the authority concludes that the merger will substantially harm competition. Given the discretion inherent in the interpretation of this threshold, various competition authorities have published merger guidelines. These are intended to assist firms and their advisers to anticipate the procedures and criteria, which will be applied in assessing a merger. Some Merger Concerns Merger reviews typically focus on horizontal mergers since, by definition, they reduce the number of competitors in the relevant markets. Also of concern are mergers between firms, which are active in a particular market with another firm, which is a potential competitor.
Re: Ideas on Using Twitter for Business - I would like to add: Provide support through Twitter Offer giveaways + contests
Re: Surveys show more and more customers are cutting costs - Adapt and adjust. Offer coupons, deals and specials. If people think they are getting a good deal they will buy even in a tough economy.
Show the Benefits - Offer a free test drive of the Product or Service with a Money Back Guarantee - Take the Risk out. This will help them make the decision but you have to work with them to realize it by explicitly state the benefits they are receiving.
Re: Ideas on Using Twitter for Business - As some of you may or may not know. I've been following EvanCarmichael authors on Twitter for about 2 months now, and I've gain some insights I'd like to share: 1) Go easy on automation and be human! 2) Use @ messages to build relationships and start conversations. 3) Offer your customers value up front for following you. (limited time promotions etc.) 4) Listen, listen, listen! A few people who I think really use their Twitter well: Paul Kedrosky (@pkedrosky), Guy Kawasaki (@GuyKawasaki), Cori Padget (@k0zm0zs0ul) etc.


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