Successful Merger Synergies – How To Make It Work
Successful Merger Synergies- How To Make It Work
This blog post is going to cover how to make a successful merger work. We will talk about the benefits of a merger and how you can implement some synergies in order for both sides to come out as winners.
# Introduction #
A company does not stay competitive in this modern world without being able to change with the times, which can be difficult for some larger conglomerates who are reluctant or flat out refuse to adapt. One way that many companies try to stay afloat is through mergers, which can have varying degrees of success depending on how they are implemented.
There are a number of ways in which a successful merger can be implemented. I will talk about the different types of mergers, give you a basic understanding of what each one entails, and then provide some examples to further aid in your decision making process.
# Types Of Mergers #
There are different types of mergers we can choose from when deciding how we want our company to proceed. These can range from an integration, which is more involved, to a merger in which the two companies remain separate entities within the same industry. Each type has their benefits and drawbacks but overall there is no "right way" to do it or "the best way." We will discuss this more later on.
The different types of mergers that you can choose from are as follows.
# Business To Business (B2B) #
This is the most direct of all mergers and is often what people think of when they hear the word "merger." In this category, one company deals with another company that has similar products or services, most often in an industry or market segment. The two companies might be competitors in some cases, but not in all. This kind of merger is sometimes referred to as a "two-way seller." They might also partner up on marketing resources such as name brand salespeople or marketing professionals for example, which can be beneficial for both sides.
# Business To Consumer (B2C) #
Another way to merge is via a two-company B2C merger which deals with a company providing products and services to the consumer market. This can be done in any number of ways, whether it be straight up trade (exchange of goods for goods), a cash-based corporate acquisition, or bond financing. All that matters is that one business buys out the other in some way or another.
A good example of such an acquisition would be if Coca Cola wanted to buy out Pepsi Cola. The two companies would come together to make one big conglomerate that caters to the consumer market. This is sometimes referred to as a "two-way seller" also.
# Industry #
Another type of merger is when one company buys out another in the same industry. In these cases, it can be the two companies' parent companies or a stand alone company that merges into another entity. A good example of this would be if Ford wanted to buy out Suzuki (a car manufacturer) because they felt that both companies could benefit from being more integrated and closer together. This would provide greater global market exposure for them while also creating more opportunities for Suzuki to operate better in the larger Ford chain.
# Broad/Industry Crossing #
There is also the broad/industry crossing or "merger of equals" which is more of a lateral move for the two companies. In this type of merger, one company buys out the other and merges it into its own brand.
A good example of this would be if Google wanted to buy out Yahoo! because they both have similar strengths when it comes to their advertising platforms and in-house expertise. When analyzing the pitfalls, this merger type can be harmful because both companies will feel that they are needed to take advantage of each others' strong points as well as strengths and weaknesses.
# Benefits Of A Successful Merger #
So now that you know what types of mergers that are available to us as well as some examples of each, you might be wondering why we would want to do this in the first place. While there can be potentially many reasons why you would want to merge, I will go over the pros and cons of a good merger and the benefits that it can provide.
For starters, many mergers will result in a collaborative effort when merging resources. Between two companies that come together, they can share their funds and other assets while also providing each other with access to new markets, products, and/or talent. A good example is if Ford bought out Suzuki (car manufacturer). Since the two companies will be working together on new cars, they will have access to each other's proprietary technology, which would help both companies to develop more affordable and high tech vehicles.
In the case of Google buying out Yahoo! Search, they would both be using the same search engine platform, which would allow them to customize and refine it over time. This has become a very important topic because search engines have become more complex over the years in order to provide consumers with products that are highly relevant to their needs.
Another reason that you might want to merge is because it can often help you save money. If you are a small company and choose to merge with another business, not only will it be easier for you to compete in the market against larger corporations, but you will be able to cut costs by sharing your resources.
For example, if Toyota wanted to purchase and merge a smaller company such as Acura (a Japanese car manufacturer), they would be able to use that company's engineers and design teams in order to update their own designs, making them more competitive in the auto industry as a whole. This would also help both companies move away from the "cut-throat" competition that is prevalent throughout most of our industry, which can sometimes leave us feeling uneasy about our position within the market as a whole.
Merging also allows both companies to work together to negotiate against large corporations, resulting in a greater profit pool. If Toyota were to purchase Acura and then merge with them, they would create a larger firm in order to take on the likes of companies like Ford or General Motors. This would help them be able to negotiate a better deal when purchasing resources such as equipment, supplies, or raw materials that they need for manufacturing. The result of this merger will be one large automobile firm that is more competitive while also being able to provide consumers with new and innovative technology at lower prices (if these are their primary goals).
There are also several advantages that can be accrued during the merger process itself. If a company decides to merge with another firm in order to make better use of their resources and provide added value, this is known as horizontal integration. This is beneficial because one company will help the other cope with negative externalities in the marketplace, such as production costs or additional risk, which are outside of their control and can potentially be detrimental to their success. A good example of this would be if Ford wanted to buy out Acura (car manufacturer). Both companies will benefit when they merge by sharing manufacturing and distribution centers around the globe in addition to raw materials and other resources that they both need on a regular basis.
Conclusion
Merging can be a difficult process and one that you should consider carefully before making any decisions. It can often be beneficial to merge with another company if the benefits outweigh the costs. However, this is not always the case since there are some things to consider as well. After all, there is something to be said about forming your own business and being a sole proprietor in order to have complete control over the direction of your company. There can also be synergies between organizations that will make it easier for you along the way when you merge with another business and begin operating under their new umbrella.
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