Merger Pros and Cons

Merger Pros and Cons

Analyzing merger pros and cons is an important process that businesses have to undertake before deciding to join forces in order to determine the benefits and risks involved. A merger is an agreement whereby one or more companies surrender their stocks to another, so they can operate as a combined entity. Mergers usually occur in situations whereby smaller companies can no longer sustain their operations in the market, hence, surrender the greatest part of their shares to a bigger firm to take charge.

The process of mergers and acquisition is always voluntary and the firm being acquired holds the decision on the stocks to release to the buyer. On the other hand, the company doing the acquisition holds the decision on asset sales. Based on the conditions, the two parties can decide to merge and become one entity. After the agreement is signed, the options become more restrictive and usually, most of the decisions are made in accordance with the procedures of the buyer.  However, the ownership of the two entities does not change.

Analysis of Merger Pros and Cons

Just like other forms of business partnerships, there are merits and demerits of a merger that every entity should know before putting pen to paper. Knowing the various merger pros and cons can help managers and shareholders in making informed decisions on whether it is a good idea for the business or not.

Pros of a Merger

A merger can also enable a company to acquire technologies, equipment and business process that it would not easily attain on its own. In this way, the companies involved may be able to save some money, which could have been used in the development of those processes.

Mergers also ensure greater market power for the combined entity. Since the two businesses come together to operate as one, they are able to quickly impact significant market share. This enables the entity to easi