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Deciding to merge with another company is a major decision

On Behalf of | Feb 27, 2021 | Uncategorized

Business growth can come in many forms. Some Maryland companies may find that opening new locations can help their business thrive, and others may look into more significant changes to help with growth. For those in the latter category, deciding to merge with another company could allow them to grow in new ways by essentially creating a new company.

This new company that forms after a merger is the combination of the two companies that chose to join forces as partners in the new business venture. This type of arrangement generally has mutual benefit for both businesses, and those companies that combine are typically of the same size. In cases where a much larger company chooses to join forces with a smaller company, an acquisition usually takes place rather than a merger, meaning that the larger company purchases the smaller company for complete control rather than equal ownership.

Moving forward with a merger is a substantial transition for a company, and when choosing a company to merge with, it is important to consider what type of company would be best. Some common mergers between companies include:

  • Two companies that provide the same service or product
  • Two companies that sell products or services that would complement each other, such as the Pizza Hut and PepsiCo merger in 1977
  • Two companies that do not share any business activity but that could enhance their business by merging
  • Two companies that operate along the same supply chain

Even if a business does want to merge with another company, there is not always another company readily available or willing to make such a change. Maryland company owners need to do their research, draft reasonable offers or consider offers that come to them, and look into the pros and cons of this business move. Of course, it is also essential to understand the legal implications of a merger and how it could affect ownership, profit share, decision making and more.