A merger occurs when two companies combine to make one large corporation. The values of the businesses coming together are usually around the same, which is primarily what makes a merger different from an acquisition. An acquisition, unlike a merger, involves one company, usually with a stable financial standing, actively buying out another business that typically needs the transaction to prevent insolvency.
There are many benefits associated with a successful business merger. Read on to learn about five perks that come with combining two companies.
There are Economic Benefits
“Economies of scale” is a term used to describe the financial benefit that the merging companies automatically receive just from combining their resources. The newly merged corporation is in a better position to expand in marketing and other pertinent elements with two powerful budgets at work. The economic benefits of a merger can even lead to hiring more staff and higher pay.
Tax season sometimes brings pain to companies. There are often fears of paying extra due to too few deductions. Mergers come with special tax benefits that include a subsidized rate. There may also be the potential to claim deductions if one of the companies that merged was doing exceptionally well before the transaction. The more successful business can take advantage of adjustments that make allowance for loss. A merger, when done right, has the power to substantially reduce a newly combined company’s tax bill.
Additional Financial Resources
The financial aspects of both companies come together during a merger. Additional assets equal more bargaining power, which could lead to better interest rates for loans in the future.
Influence on the Global Markets
Many companies only dream of having an influence on the global market sphere. A merger could put such power in the newly combined corporation’s hands. Global markets have few restrictions, which means that the sky is nearly the limit for executives of the merged company.
More Research and Development
Knowledge is priceless. Mergers often mean the combining of staff members, which inevitably signals expanded knowledge. A company’s research and development (R&D) field has the power to go from minimal to extraordinary with a successful merge. Expanding research and development within the company means that less of the budget needs to go towards external affairs such as independent contractors.
There is much to love about mergers. Not only are there financial benefits associated with the transactions, but combining two companies to make one also presents the perk of added knowledge. With the help from a securities law attorney you can make the process go much smoother than otherwise. With so much to gain, it is little wonder why so many businesses go the way of mergers every year.