A business merger is the consolidation of two companies into one legal entity. The company that merges gains greater bargaining power with suppliers, customers and competitors due to economies of scale and the combined resources and expertise of the merged entities. A merger can be a strategic move to enter new markets, acquire customers and products, gain an advantage in the production process or eliminate business competition.
Mergers are often confused with acquisitions, but they differ in several ways. In a merger, both companies combine into one legal entity; in an acquisition, one company buys the assets and operations of another company. The acquisition process involves the evaluation of target companies, due diligence, valuation and negotiation; and then the integration and financing of the acquired company.
A company may choose to make an acquisition because it wants to expand its market share, reduce operational costs or improve its management and leadership skills. A company may also need to acquire new technologies, increase production capacity or improve its pricing models. Acquisitions can also be a way to diversify risks and hedge against cyclical losses.
Whether you are considering a business merger or an acquisition, it is important to consult with attorneys who specialize in corporate law. A lawyer can help you evaluate your strategic objectives, assess and value businesses for sale and negotiate the terms of a transaction. Attorneys can also help you open new business bank accounts, get state and federal tax ID numbers for the new company, and close down the old business.