Merger Myths and Misconceptions

Negotiating a merger can exhaust company resources, and therefore, it is incredibly essential for you to make the right decisions. If you want your company to negotiate a successful merger, then you need to have an edge. This can only occur if you have the proper knowledge while making the deal for a merger.

If you’re contemplating a merger, you need to know these common misconceptions so you can avoid amateur oversights while negotiating a merger.

 Your company’s financial statements are weak 

From large multinational companies to small businesses with little to no funding has the potential to be sold. In this era, money or turnover is not the only thing driving a merger. It is about how you Brand/market your business to the potential buyer showing the company’s potential by valuing the user base, the company’s vast experience in the field and the technological edge that your company has over others. These points, when presented well, can impress the value of your business and get the best deal possible from potential buyers.

Merging your company will save administration costs 

One of the most common misconceptions about mergers is that they will save money on administrative costs. It’s probable, but it’s also possible that it won’t happen. Several well-intentioned people who observe your business from the outside might suggest that there need to be a bunch of mergers to save financial resources. This misconception primarily capitalises on the collective, universal aversion to spending more money on administrative expenses. Because there is no one to blame for unnecessary overhead expenditure, it is a risk-free premise. 

It is preferable to set a high-level strategic objective while remaining realistic about the organisation’s administrative savings. There is a large amount of savings after a merger only when one of the companies involved in the merger is significantly larger than the other one and has a well-oiled administrative system.

Many employees will have to be let go 

The second most common misconception about mergers has been that they result in mass layoffs. To avoid the drop in stock prices, the companies are usually forced to offset the additional cost of the merger, and the easiest way that they do it is by firing employees. There may be some inadvertent layoffs, but any significant job losses during a merger are almost undoubtedly unavoidable. In fact, if it encourages more productive delivery systems, a merger may dramatically decrease some of those casualties and result in your company working much more efficiently.

Mergers are only for companies that are in trouble 

Recognising when it’s appropriate to ally with another company is a difficulty that every company in the process of a merger has to encounter. Sometimes large corporations have a tendency to hold on to their businesses for longer than necessary. Merging with a company when the time is right will only be an advantage for both organisations.

 Your company’s individual identity will be lost 

 A lot of hard work is behind the goodwill that your company has earned. If this is the case, the right buyer will see the significant position that your brand name holds in the market and will not want to strip the company’s individual identity and rebrand it after the merger in favour of brand continuity. Therefore, following an acquisition, your company does not need to undergo significant change.

Avoid speaking with multiple buyers simultaneously

This one stems from the apprehension that it will alienate your potential buyer. Buyers often tell you to avoid talking to other potential acquirers for your company while negotiating a deal; this is most definitely to prevent you from getting better offers than what they can give to avoid paying more money for your company. With the mindset of appeasing one bidder, you’re sabotaging your own business.

If an investment bank acts on your behalf, buyers will be much more serious and prepared. The bank will provide you with much better guidance, and inevitably your merger will be a well-managed process with a lower risk of failure. 

Conclusion

It’s easy to fall into merger misconception traps that leave you with inferior and missed out market deals decreasing your company’s value further. However, mergers are about presenting your company correctly, showcasing its assets to the right buyer. Therefore keeping yourself up to date and knowing how to make the right decisions can result in the success of your company being acquired.

We at Consverge provide access to Industry-leading experts that will help you avoid the above assumptions, giving you human insight, clarity and knowledge while making decisions during Mergers and Acquisitions. In addition, we aggregate these insights through our EN partners, who provide relevant Subject Matter experts for businesses to make informed decisions when negotiating merger deals.