The business world is constantly changing and evolving to upgrade its game. But there is a move that hasn’t changed that much. That is a merger. And what is a merger? Well, that is exactly what we are going to discuss today, showing you how this works, what could be the benefits for companies, and some quality tips to have a successful merger with the company perfect for yours. Keep reading to find out more!
What does it mean to merge two companies?
It’s when two companies decided to start a path in the business world together as equal entities. Sounds easy, right? But there are some things to consider before doing this. Also, there are different mergers. Check them out:
- A horizontal merger happened when two corporations that used to compete with the same products decided to become one company. Ex. Exxon-Mobil.
- Vertical merger: here, you will find two companies whose products or services complement each other, which create a perfect union. Ex: a bottle production company with a soda company.
- Conglomeration: two businesses with the way different products or services start a business relationship, usually this involves a significant company with other labels or subsidiaries. Ex: Disney Company
There are many reasons why a merger is the best next move for a company, each business is always looking for the best, so they will put their motivation during the negotiation. However, this decision is not taken lightly, or in the heat of the moment, a merger can take months and even years to finalize, and for both parties to be happy with it. With this said, we can find some critical reasons such as:
Reduce production costs
Especially if the merger is with competitors, take, for example, Exxon-Mobil merger, they were able to reduce those costs and put that money into upgrading their production, making them one of the best traded international oil and gas companies in the world.
Being able to reach new markets
Merging with a more robust and more powerful company can help you enter a market that you only had dreamt of before, even taking your products to a worldwide market. The entertainment business is a fantastic example of this. SM Entertainment, a South Korean company, possesses many labels and subsidiaries under its name. One of these is Woollim Entertainment that decided to merge with the subsidiary SM Culture & Content (SM C&C). However, it’s still an independent label that uses SM distribution system to release its artists’ music and content to the world, making it a win-win relationship, plus having the safety net that SM Entertainment’s power offers.
Practice and Technical Knowledge
Another excellent reason for a merger is to share their practice and technical knowledge to make or offer better products and services. Pfizer and Warner-Lambert are an example of this. In 2000 Pfizer acquired and merged with Warner-Lambert, even when they already had business deals. Still, these weren’t what Pfizer was expecting, so after Warner faced a failed merger with another company, the pharmaceutical giant acquired it. All of this because they want the ownership of top-selling cholesterol medication Lipitor with its practice and technical knowledge, of course. Also, this is pretty normal in the pharmaceutical and drug business world.
These reasons are only a tiny glimpse of what can be done after a merger or acquisition. The goal is to become the best in their areas like Exxon-Mobil or to offer the best for their employers or, in this case, artists and fans like Woollim Entertainment. When it’s correctly done, a merger can become what your business exactly needs.
Tips for merging two companies successfully
There is not a list of established tips for a successful merger or acquisition. This will depend entirely on the parties involved, what they want, what they are looking for or expecting with this, and what they will bring to the negotiation table because this is pure negotiation. This can take days, weeks, months, and even years to finish, with countless meetings that can be done in the company building or the golf field. However, consider the effort, the money, and last but not least, the people involved. They are the most important. Check out some tips for dealing with them.
- Put people to talk: this looks easy but, in reality, is a tricky point. Listen, people and workers in both companies need to sit down and talk about their methods and procedures. Human nature resists change. But for example, if you put both sales departments into a meeting to discuss their strategies, good things can result, which is applicable for every department.
- Learn to say goodbye: losing people is complex and a tough decision, but it must be done. After the merging, the new company cannot keep the people that won’t be needed, for this is necessary a full and deep study of how the merging will change the production and corporate level and what will be required from workers.
- Honesty above all: after the evaluation and studio about how the merger will impact production, honesty is what workers will ask from the higher-ups. It has been proved that finding out about losing a job from your direct supervisors helps to cope with it, then a letter in the next paycheck or an email.
- People are the motor of any company: after the merger people need to cope with the changes, from working with new employers to new methods and procedures this time will never be an easy one. Getting used to all is hard, especially if your workers lose friends and must work with total strangers. So give them time, and expect a reduction in productivity.
Mergers will never be easy, but they can bring new opportunities, challenges, benefits, and fulfillment of goals if done correctly. Check out more interesting articles about the business world with the Magazine!
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