When we think of mergers and acquisitions, we tend to think of industry titans that take all the headlines when planning these multi-billion-dollar moves. We don’t often think of small business mergers and acquisitions.
For example, a notable recent example is Microsoft’s acquisition of Zenimax, one of the most profitable and well-known video game holding companies in possession of many publishers and development studios alike.
Just recently, Microsoft has been fighting the CMA regulatory authority in the UK to acquire Activision-Blizzard, which has so far been suspended under anti-trust legislation.
Impressive headlines, interesting stories, and huge industry waves are just some of the consequences caused by moves like this.
After all, small businesses by their very nature have less access to capital, and incorporating, delivering, and sustaining those revenue streams can take a little time to smooth out through a process like this.
Let’s consider how a small business may plan out this process. Perhaps one day, you’ll use this advice to structure your own acquisition:
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Small Business Mergers And Acquisitions For Strategic Expansions
A strategic expansion can be a wise justification for acquisition, which may include making use of economies of scale, ensuring you absorb a competitive enterprise, or simply coming together to help both struggling firms pool resources and gain a better chance of survival.
It might also include penetrating new markets, for instance, if you were considering starting anew in another country or expanding overseas, an acquisition can be a healthy way to go about that, grandfathering in knowledge, understanding, and goodwill.
Performing Due Diligence
No matter what purpose you plan your small business mergers and acquisitions for, it’s essential to make sure you use business consultants for due diligence. This way, you can properly estimate the value of the business being acquired.
You can check their books and make sure everything is above board, ensure that assets stack up and that the projected revenues of the company are as promised.
Moreover, you’ll also be able to determine the challenges and possible difficulties that the enterprise could have had, which may not deter your deal but can certainly inform it more easily.
Acquiring Intellectual Property & Talent
Another valid justification for acquisition is to not just acquire the brand but to subsume its assets and potential into your company.
This might involve owning intellectual property you feel is most worthwhile, or talent that can help you navigate your business to the next step.
Note that in the latter challenge, you need to make remaining at your company worthwhile even through the growing pain, so reviewing pay scales and contracts should be considered a valid business expense.
Moreover, you may shed some employees from this process as a natural consequence of the change, so it’s important to prepare for that outcome as well.
That is especially true in a small business where fewer people do more on a daily basis.
Small Business Mergers and Acquisitions Conclusion
With this advice, you’re sure to possibly push the ball of momentum downhill and see the possibilities of your acquisition potential. Have you ever merged with another business, a partner, or been acquired by one? I’d love to hear more in the comments below about it.
What is a merger?
The ownership of companies or business organizations are transferred to another company or business organization.
What is an acquisition?
An asset or company obtained by another company.
When do small businesses mergers and acquisitions commonly occur?
When a small business wants to expand it may merge with another small business.
What is due diligence?
Reasonable steps taken to satisfy a legal requirement. These are needed for large and small business mergers and acquisitions.
Can property be obtained in an acquisition?
Yes, a business may obtain property as well as the business in an acquisition.
What about employees of a small business?
They be obtained or lost during mergers and acquisitions.
What is intellectual property?
It is a work or invention that is a result of a creativity to which you have the rights to and that you can apply for a patient for.
How many IP’s are there?
There are 4 intellectual property types: patents, trademarks, copyrights and trade secrets.