A business merger is when two companies combine into a single legal entity. There are several types of business mergers. Mergers can allow companies to achieve economies of scale, gain access to new markets, and gain competitive advantages. They can also be an effective way to increase revenue and profits.
However, the process of a business merger can be complicated. There are many factors to consider, such as legal and financial issues, as well as cultural considerations. Moreover, the success of a business merger depends on the strategic objectives both parties set for themselves. The key is to ensure that the combined company creates efficiencies that are more valuable than what either of the smaller entities could achieve independently.
Moreover, the type of business merger you pursue will shape everything from integration planning to governance and shareholder dynamics. Learn more about the different types of business mergers and their benefits by reading this article.
During the merger process, both companies will need to review their assets, liabilities and cash flow. In addition, they will need to assess each other’s intellectual property and supply chains. Ultimately, it will be important for both parties to work with professional advisors to evaluate each other’s value and determine whether they are a good fit for one another. A discounted cash flow (DCF) valuation is typically the preferred method of valuing a business. This method equates price to the value of future cash flows, including synergies and tax.