Like most business owners, you are probably always on the lookout for ways to improve or expand your company. No matter how long you have been in business, you understand that the world can move quickly around you, and standing still can mean becoming obsolete. This is what motivates you to keep current with the trends of your industry and stay alert for new opportunities.
If you have learned that the fate of another Texas business is on the line, you may wonder if this is the right opportunity for you. The other business may be struggling to remain solvent, seeking to sell or looking for a company to partner with, among other circumstances. It is possible that this could be just the chance for you to grow your business, but you must first gain as much information as possible about your options.
Understanding the difference
The two alternatives you may be considering are a merger or an acquisition. With a merger, you and the owner of the other company agree to join forces to form a completely new entity. You may change your name to combine the two business names, and you may work as a partner with the owner of the other business.
An acquisition, on the other hand, is when your company effectively takes over the other company. You may buy its inventory, its stocks or both. The other company may cease to exist altogether, or you may incorporate it with your business. An acquisition can be an action taken with the cooperation of the other business owner, or it can be a hostile action in which the board of directors has no say.
Benefits and drawbacks
The risk of a merger or acquisition is that it may not prove as profitable as you expected. You may find yourself stretching your resources too far or facing the same problems the owner of the acquired company faced. On the other hand, some of the benefits of merging or acquiring another business include these:
- Streamlining your operations and sharing expenses
- Enjoying tax benefits by offsetting losses of one company with profits of the other
- Increasing your access to funding or financing you previously did not have
- Opening your business to new markets
- Diversifying the product or services your company offers
Before taking any steps toward mergers or acquisitions, it is wise to seek as much information as possible. A skilled business attorney can not only advise you on the specific details of the deal but can also provide general counsel for the well-being of your business.