A merger is a legal agreement between two companies to fuse together so as to become a single entity. This helps them share their resources and gives them a robust set of assets thus creating an edge over other competitors.
Reasons for a Merger
than their initial market.
Increasing Shareholder Value
When companies merge they are able to share expertise in internal controls and management. This leads to better executive decision making which inspires the growth of the company’s sales. Better cash flow is also achieved and all this results to better dividends for the shareholder as the business performs well and increases in value.
Increasing Market Share
Top on the list is that a merger typically helps a company gain a larger market share. With double resources available, it goes without saying that the business will have a wider reach. This significantly increases the number of sales made by the company and translates to a higher market share. In Kenya, the Airtel and Orange merger which unfortunately didn’t come to pass is a good example. By merging, the two companies would have a significantly higher market share and would provide good competition for the market leader Safaricom.
Venturing into new markets is another reason that drives a company to merge with another. Through a merger, companies get access to their partner’s clientele. This helps them push their products or services even further
An acquisition is different from a merger in the sense that a business changes ownership.
Total asset acquisition leads to the creation of a new company with a different name and structure. This is often the last result for investors who file for bankruptcy.
It is important to get a qualified advisor to walk you through the daunting process of merging or acquisition. We facilitate the process by offering guidance on the procedures to take for a successful merger or acquisition.