What to Consider Before Merging with another Small-Medium Business

London has the highest number of private sector businesses of any region in the UK. This is according to the Federation of Small Businesses. They report that approximately 841,000 firms were located in London, followed by the South East region with 791,000 firms. While these statistics mean that there is a healthy economy in London, budding entrepreneurs may wish to merge with other small businesses to stay ahead of the nearly 900 thousand possible competitors.

 merge 300x199 What to Consider Before Merging with another Small Medium Business

But before you sign on the dotted line, there are a few things to consider before partnering up with another business.

Profitability of the Merger

Of course, the very first thing to consider is if merging would benefit your business. This may seem like a basic requirement for any merger but there are a number of factors to consider when speaking about profitability. Merging takes a considerable amount of time and energy, as well as money. You should figure out if the entire process of merging with another entity is in your business’s best interest.

It’s always advisable to have all the facts to hand before committing to a merger. Hiring forensic accountants in London, such as those from http://www.frenkels.com can be the first step in ensuring you have all the information you need. They specialise in uncovering pertinent data such as a business’s economic value.

Compatibility of Cultures

Aside from numbers, it’s also important to ensure that your companies will mesh well with each other. You’re not only creating a partnership between two businesses, you’re also creating a new team of employees. Will your teams get along well with each other? Are the people from your old business getting the respect and value they deserve? Are your workers happy with the new environment? These questions are important when merging with another business.

Potential Legal and Financial Drawbacks

Contracts are tricky and seemingly non-binding agreements may put you in a precarious position later on. Many companies have lost millions from contracts and agreements with ambiguous language. Words like “good faith” and “best efforts” leave a lot of the provisions up for interpretation. Make sure to clear every agreement, provision or letter of intent before securing a merger.

Mergers may or may not work out in the end. Preparing for a future split should be done before committing to merge in the first place. If your company won’t survive a split, then merging may not be the best option for you at the moment.

Considering these three things before sealing the deal can end up saving you a lot of time and money whether or not you go through with your merger. Making it alone can be difficult but committing to another business entity can be a lot trickier. Step back and look at the big picture. Is merging the best step for your business? If the answer is yes, even after carefully examining the three factors above then extend your hand for a firm handshake and seal the deal.

 

Image courtesy of Chaiwat/ FreeDigitalPhotos.net

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