Corporate mergers happen when a company combines their own business operations with that of another business. The aim of corporate mergers is to gain access to a larger market, to gain more resources and to reduce competition. If businesses are struggling with growth, corporate mergers can be a practical way to access a wider market and resources in order to increase their opportunities, and ultimately improve profitability.
That being said, corporate mergers do come with their own risks. Let’s take a closer look at the risks and benefits involved in corporate mergers and how they compare.
What Are The Benefits Of Corporate Mergers?
Increases Market Share
One of the main benefits of corporate mergers is that they increase the market that your business has access to. By merging with another business, you’re automatically inheriting their customer base as well as reducing your competition by quite literally joining them instead.
Expands Business Into New Geographic Areas
If a company is struggling to grow, then one of the issues that they may be facing is how to expand their geographical reach. By merging with a business in a different area, the company has a chance to expand and ultimately secure a wider market base.
Rescuing An Unprofitable Business
By providing access to new finance and resources, corporate mergers can potentially rescue a business and help return it to profitability. However, it may be harder for struggling businesses to find a merger who is willing and has the means and resources to take them on.
Reduces Operational Costs
Another benefit of corporate mergers that is often overlooked is reducing the cost of operations. Corporate mergers allow companies to achieve ‘economies of scale’. This allows them to spread out investments on assets over a larger output, such as the bulk buying of raw materials.
What Are The Risks Of Corporate Mergers?
Difficulties In Communication
Corporate mergers can be hard to settle into, and often it can be difficult to establish a synergy between the new working partnerships. Joining different working cultures together can be a challenge, and mishaps in communication may have an impact on performance and employees.
Potential Unemployment
When corporate mergers are formed, it is common for processes and resources to be streamlined. This may involve eliminating any underperforming assets. When cuts are made to the business, unfortunately this may include employees being made redundant.
Higher Prices
Corporate mergers mean reduced competition and an increased market share. This gives the merger a monopoly meaning that they can increase their prices. Whilst this can result in more profit for the business, it is important to strike a fine balance between increasing prices and maintaining a loyal customer base.
What Should I Do If My Business Is Struggling?
Whilst corporate mergers can be beneficial for business growth, unfortunately this does not always work out. If you find that your business is facing financial difficulty, you should consult the advice of a business rescue expert as soon as you can. They will be able to advise you on the best methods for recovering your company, with the ultimate goal of returning it to profitability.
Don’t hesitate to get in touch with our experienced team at Ballard Business Recovery for confidential advice on moving your business forward.
