A business merger involves two businesses combining to create one company. This typically involves the consolidation of assets and liabilities into a single company, with new corporate leadership set up to include representatives from both companies. Stocks of both companies are retired and replaced with new shares in the merged entity.
The motive for a merger can vary, but many reasons may include increased market share, competitive advantage, or strategic opportunity. Regardless of the motivation, the M&A process requires careful consideration of how the resulting entity will operate, including anticipated revenue streams and cost synergies.
During M&A negotiations, it is also important to consider the impact on employees. While some employee layoffs are inevitable, the merged entity can make a concerted effort to preserve jobs for as long as possible, especially in a struggling economy. In addition, a merger may allow for greater employee benefits as the combined entity will be able to offer more than a single employer could alone.
It’s also crucial to understand the difference between a merger and an acquisition, as these terms are often used interchangeably. However, they have significant differences in terms of commercial outcomes. The type of M&A structure chosen will influence everything from integration planning to governance and shareholder dynamics.