Business — February 26, 2020 at 10:06 am

Are You Ready To Merge With Another Business?


Imagine you own a small business of your own. Time passes by, you’re doing okay, but it seems as if it is missing a part. In the business world, a merger is quite a common thing. You may have heard of big mergers such as Daimler and Chrysler, Exxon and Mobil and American online and Time Warner etc. Some may oppose the idea of two businesses coming together, however it could be a positive and a profitable way to go about.

Search For The Options You Have 

Whatever the type of business you are leading, there will always be a competitor in your town or area. They may have some stuff that you do not have, and you may have some that they miss. It could be that people who want to buy both of these, end up having to go to both the stores. That may lead to the customers feeling like it is too much of a job to do, hence they go off to a whole new store somewhere else to buy what they want where everything is under one roof.

In a situation as such, you and your competitor both will lose business. You can initiate a merger in this situation by talking to the competitor. It is important that you agree on the terms and conditions and always refer things to commercial lawyers Queenstown before you decide on anything.

Profit Sharing In A Merger

As stated above, a merger will make sense if the new company can compete with all the other competitors in a better manner than the two firms were doing separately. This sort of a merger would also ensure long-term survival and it will be an opportunity to have an improved position in the market. Plus, there will be a chance to go for a better business model.

Partners in a merger will also expect sales to rise and hence profits to rise as well. This is understandable because now, all the customers who used to frequent other stores are supposed to come to your new, merged one. Therefore profits post-merger are supposed to be better than pre-merger. So both parties involved must have an understanding of how to divide this profit and not to have any problems while doing that.

Equitable Shares 

You must have a business plan developed once the merger is about to take off. The marketing methods that you used prior to merging will not be suitable now that you have a different brand, probably a physical place different from what you had and a new standing all together. At the very beginning you might not have profits. Therefore a break-even time must be considered.

Once the business plan is complete, you will be able to look at the sales and calculate the profit and then see how much of a profit you will be making after, say one year. This profit will be divided between you and your partner in the merger and it will have to be equitable. Meaning if you own the physical place, your partner does not have to pay rent, and that will have to be taken into account when you decide how the profit is to be divided.

A merger is a successful solution to a competitor’s problem.  It’s prudent to have legal advice before deciding on anything regarding the merger such as how marketing will be done and how profit sharing is to be decided etc.

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