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Learn more about mergers and how they work

Merging is a term that you may have heard, being in the business world. It means that you're combining two businesses into one. A merger is much like a marriage, and it can be a great way to grow your business.

Usually, mergers work by combining assets, staff members and other parts of the two businesses together. This creates a brand new legal entity. It's smart to speak with your attorney before you start this process, because there are many downsides (and positives) to consider.

What kinds of mergers are there?

There are four main types of mergers. These include:

  • Conglomerate mergers
    • These mergers merge two companies that have little in common
  • Horizontal mergers
    • These mergers put together two identical (or nearly identical companies). The merger's goal is to reduce competition for the businesses.
  • Vertical mergers
    • Vertical mergers bring together two companies within the same industry. They may be focused on different aspects of production.
  • Concentric mergers
    • Two companies with similar or identical consumer bases may merge through a concentric merger.

Are mergers different from acquisitions?

Yes, they are. Mergers bring together two companies into a single, new entity. With an acquisition, a company buys another and brings it into its own. The original company stays the same.

Should you merge your business?

Prior to merging your business, it's important to speak with your business attorney about the details. Merging two companies you own into a single company may make sense, because it saves manpower and reduces overhead costs. Merging may also help you achieve the growth that you've been interested in, and it can reduce the stress you face. Instead of having two businesses that you have to work with (or another business to compete with), you're left with just a single business.

Merging helps you improve efficiency, save money, grow your customer base, reach new markets, increase business intelligence and minimize competition. Some downsides are that you can have culture clashes as companies combine, employee shake-ups and more liability.

Overall, there is a lot to consider when you are thinking about a merger. Your attorney will be able to help you understand the legal process of a merger and the steps you need to take if you'd like to merge your business with another. Consider all the aspects of mergers carefully to decide if a merger or acquisition is actually the right choice for your business moving forward.

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Lawrence R. Jensen & Associates
95 S. Market St.
Ste. 550
San Jose, CA 95113

Phone: 408-465-0293
Fax: 408-899-2403
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