Business Mergers: Understanding the Risks and How to Mitigate Against Them
Business mergers, when done right, can be mutually beneficial for all involved parties. However, there are some serious challenges that companies must overcome when dealing with mergers and acquisitions. If not planned for and mitigated against, these obstacles can lead to financial loss, a lack of shareholder returns, and possibly even complete financial devastation. Whether you are interested in purchasing an existing business or believe your business may fare better with a larger brand name behind it, the following information can help.
The Importance of a Unified Vision
When examining a possible merger, companies may find that certain elements are difficult (if not impossible) to measure. However, even when measurements are possible, and data and projections look great on paper, they may not translate into real or actual success. Failure to ensure both companies share a unified vision is often the cause of disastrous outcomes.
Take Quaker Oats’ acquisition of Snapple as an example. Purchased for $1.7 billion, Snapple appealed to a specific niche market. That had been their vision and their focus. Unfortunately, Quaker tried to take the company mainstream and failed at creating any serious interest among consumers. Just a little more than two years after the acquisition, Quaker gave up on the venture and sold Snapple for a mere $300 million.
On the other side of the spectrum is the Disney-Pixar merger. Each had their own vision, their own talents, their own objectives. However, there also existed a synergistic, almost magical kind of collaborative effort between the two major entertainment companies. They hit it big when they released, Frozen, now the fifth-highest grossing film in history.
What made the difference between these two companies? Why did one fail and the other succeed? Much of it can be attributed to each company’s ability to clearly communicate their vision early on, but ensuring that those visions mesh well is yet another component of success. The performance of due diligence, respect for the acquired company’s culture, and intentional efforts to form positive relationships are also critical steps to success in a merger.
Contact Our Fremont Business Law Attorney
If you are thinking of purchasing or selling a company in a merger or acquisition, it is important to have all elements carefully reviewed by an experienced attorney. Louis J. Willett, Attorney at Law, is the name to remember. Backed by over 30 years of knowledge and experience, our Fremont business law attorney can review documents, assist with due diligence, and explain the possible outcomes in your upcoming business transaction. Start by scheduling a free initial consultation. Call our office at 510-791-2244 today.