Your Guide to SME Business Mergers in the UK
A business merger can offer many benefits for SMEs. Cash flow is at the top of the list.
A quick example: according to the Department of Business and Trade, 99.9% of companies in the UK are SMEs. A survey published in 2023 highlighted how 55,000 companies fail due to cash flow. A merger, bringing two profitable companies together, can prevent that. But a business merger is different to a business acquisition – something we’ll explore in the article.
The complexity of either one of these processes needs expert legal support to ensure successful outcomes. Below, we’ll give you a guide to SME business mergers.
Understanding mergers and acquisitions
A merger has multiple definitions but, broadly speaking, it refers to two (or more) companies entering into a deal on roughly equal terms, creating one new organisation.
A business acquisition is when shares of the majority or the entirety of the company are sold to assume new control of assets and business operations. A business acquisition happens when an owner decides to sell or if the company rapidly grows. Sometimes this means that one company absorbs another.
And these aren’t simple processes. The complex is complicated and can take months, especially company acquisitions. These transactions can vary greatly in complexity and scale – something corporate solicitors can help you manage along with other matters.
Benefits of mergers
The strategic benefits of mergers are profound. Mergers can open doors to new investment, new technologies and product lines, and allow brands to enter new markets. With a competitor turned into an ally, these businesses have a real edge on the rest of the market. There’s also the obvious financial benefit.
And, by pooling resources and capabilities, businesses can more effectively tackle large-scale projects and investments. That’s something SMEs with a lack of funding can struggle to do on their own. Then again, mergers aren’t guaranteed to work, but they can with the right understanding, legal support, and business potential.
Navigating the risks
Mergers can carry risks. They’re not always successful. Google and Motorola are one example of a high-profile merger failure.
What causes a merger failure? A lack of diligence, hidden financial problems, client dissatisfaction, and poor staff retention. Mergers can also unsettle employees and customers. There’s the potential to affect company culture and customer service quality. Effective communication and strategic management are essential to prevent these challenges.
Having a person acting on your behalf is essential. The process is long, time-consuming, and complex. A legal expert’s skills ensure compliance with regulations, address potential legal disputes, and enable smooth execution of the process. Solicitors can provide crucial advice on the structuring of transactions, safeguarding business interests, and preparing for any legal challenges that may arise; something most business owners won’t have a clue about, but they can be advised on.
Mergers are a great business strategy. Some examples of high-profile business mergers include:
● AOL and Time Warner
● Heinz and Kraft
● eBay and PayPal
Despite being high-profile and successful, these companies needed to consider all the essential factors we’ve listed. If you are considering a business merger, consider legal advice.
*This blog post is provided by the business owner featured – the views and opinions expressed on this blog are not our own.