Business & Education
Factors A Company Need To Consider When Entering Into A Merger Agreement
The top managerial personnel of small corporate enterprises are always searching for opportunities to increase their revenues and gain the competitive edge over their rivals. The top executives of a company can achieve this by creating an innovative product in the market or refurbishing the company’s existing product-line. In addition to this, they can also expand their customer base by enhancing the business enterprise’s online presence or entering int0 merger agreement with other businesses. In the corporate world, a merger takes when two companies of almost equal size and operating capacity combine their resources to establish one large establishment.
Bob Stefanowski , leading expert on mergers and acquisition in America, explains that mergers and acquisitions are a common feature in the world of business and finance. However, the management of any corporate enterprise needs to keep in mind a number of important factors before taking the final decision to merge with another company. While such a business consolidation is beneficial to both organizations, searching for a corporate enterprise with identical goals, work culture and mission can be a challenge. This is the reason why it is important for the top executive of a corporate enterprise to consider the following points before entering into a merger agreement:
- Formulate a business case: For most companies, entering into merger agreement with other similar business organizations can be costly and time-consuming. In addition to this, a number of potential problems will arise if the top executives of both corporate enterprises do not carry out the procedure correctly. They need to decide beforehand why they are entering such an agreement and what their objectives are.
- Objectives of entering into a merger: Before entering into a merger agreement with another company, the management of a corporate enterprise needs to consider objectives of the entire exercise. For instance, if they want the other organization’s business contacts, they need to retain a number of important people after finalizing the deal.
- Ensure the cultures of both organizations are similar: When considering such a business consolidation, it is vital for the top management of both corporate enterprises to keep in mind their organization’s work culture. If this critical element is not compatible, the merger agreement has the potential to destroy both organizations.
- Think of the worst but hope for the best: If a merger agreement with another company goes wrong, it is difficult for small corporate enterprises to survive in their market environment. Considering this essential fact, both business organization need to plan according when they are negotiating such a deal.
- Avoid making critical mistakes: It is vital for both corporate enterprises to seek advice for professionals in the legal and accounting fields before conducting the negotiations and preparing a letter of intent. This is because this document contains binding provisions that both companies need to observe and can result in difficulties when entering into a definitive agreement.
Bob Stefanowski says remembering the above points when entering into merger agreement can help the management of a corporate enterprise make a prudent decision on its implementation.