Business mergers and acquisitions are ways that small businesses can grow. While these are often referred to together, they are two different concepts.
Whether you’re considering a merger or an acquisition, there are a few points to consider. Making sure you understand these can help you to make the right decisions during the deal.
Mergers and acquisitions are different
A merger creates a new company by combining two existing companies. A new legal entity is formed and the two smaller entities are dissolved. You’ll need new bank accounts and everything else for the new company.
An acquisition grows a company by absorbing another business into the primary business. The acquired company is dissolved and sometimes liquidated. It’s often possible to continue to use the absorbing company’s bank accounts and other accounts.
Valuation is crucial to the deal
Knowing the value of bother merged companies or of the acquired company is crucial to ensure that the deal is viable. This gives both parties the information they need to make a deal that they feel is suitable. Valuation is usually handled by a business appraiser who can look into every aspect of the company to determine the value.
Protecting yourself and the company is important
An acquisition or merger agreement is important in these situations. It should be as comprehensive as possible so both parties know exactly what to expect. This also provides protection for you in case the other party doesn’t abide by their part of the agreement.
As is the case with all business transactions, having proper contracts that are legally binding is important. Working with someone who’s familiar with this area of business is beneficial so you can have another set of eyes on the situation. You also need to consider things like
