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What does the average person, including small business owners think of, when they hear the words “Mergers & Acquisitions”?
Those words conjure up images of movies and television shows about huge, billion dollar corporations attempting to take over other huge companies with high profile powerful lawyers, accountants and billionaire owners in $5,000 suits, all attempting to outdo each other. It all starts with a friendly proposal for a merger or an acquisition, but after several massive bun fights in the boardrooms and possible court room drama, in reality, it usually ends up with one of the corporations completely swallowing up the other. Even after all the promises to the contrary, in a short period of time, there’s very little left of that company’s identity or culture.
On the large movie screens or the small television screens, mergers and acquisitions are considered to only be in the domain of huge, multi-million or billion dollar businesses. In reality, a merger or an acquisition can be between any size company, including very small businesses.
Here is a scenario; Imagine a very successful Mum and Dad fish & chips shop operating next to a family run struggling fried chicken shop. The owners of the fried chicken shop are tired of the long hours they must work just to survive, without getting ahead, no way to increase profits. The owners of the fish & chips shop decide that they would love to expand and by buying out the fried chicken business, not only will they have larger premises, but they can add fried chicken to their current impressive menu, increase the number of customers, reduce their administration costs and possibly obtain a better deal with the landlord. They engage a business broker who approaches the owners of the fried chicken shop. By utilising the services of a business broker, emotions are taken out of the equation, especially during the negotiating process. The broker sorts a deal with both parties, they agree on a price and take over the shop. This transaction is an acquisition, nothing less, nothing more. If the owners from both businesses had decided to join the two shops and benefit from each other’s customers, save money by reducing the staff, etc, this would have been a merger.
Very often the most cost effective, best and quickest way for a small business to grow, expand their customer base and increase their profit is to acquire another business. The acquisition may be either in the exact same industry or a business that might be able to bolt on to their existing enterprise, by offering an additional range of product or services. Generally, there are also several cost savings, such as administration, to be achieved by merging with or acquiring another business.
If you own a small successful business and are finding it difficult to increase your turnover, number of customers, etc, you should seriously consider acquiring or merging with another business. Organise a meeting with an expert business broker for advice on how to proceed forward.