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Mergers, another option for your business?

By Elliot Harris

We talk frequently about the acquisition and disposals of business as part of your business strategy, but we speak less often about mergers because they are seen all too frequently as takeovers, but does it need to be that way?

Of course, not all mergers work, and the SME sector is littered with failures. However, in most cases, the problem was a lack of will and poor implementation, and not that the concept was wrong in the first place.

Let us consider mergers in the professions or in the case of public or private companies. Yes, these mergers take place in the belief that they will make the merged entity more efficient, effective, and more profitable. Yes, such mergers can fail, but they fail for the same reasons as most mergers: poor planning, incompatible cultures, and lack of clarity about what constitutes success.

In truth, there are very few “equal” mergers. More often a merger involves a larger entity taking over a smaller one (though it occasionally happens the other way round). However,  the directors have a duty to their shareholders  (often one and the same), and partners to their fellow partners to get the best possible result for the future of the business. In addition, what is often forgotten is that have a duty of care to their employees and creditors. Let us not forget the employees: not all mergers mean job losses, although some do, when a business fails, everybody loses.

Economies of scale have their place in the argument, but a so-called larger organisation does not have to lose the personal touch or become more remote. It is all about the planning and what both sides can gain. Quite often the merged entity can provide more, not less because it now has the resources to do so. But above all, you must be clear about the benefits sought and whether they can be realistically achieved. Likewise, don’t underestimate the difficulties in merging two different cultures but addressing this in the planning stage can avoid much heartache later

The fact is that two SMEs who serve similar markets in different ways can take the best of both and create a greater whole with an open mind and good planning.   There is a fear factor from the directors and business owners who will see this article as the equivalent of turkeys voting for Christmas. And yet we fail to remember why we went into business for ourselves in the first place: to make a living for ourselves and our families and to improve our quality of life. So don’t dismiss the idea of a merger out of hand and be open-minded about the benefits.

Elliot Harris | UK Business Advisors (ukba.co.uk)

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