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Mergers: Are they really good for business?

On Behalf of | Nov 16, 2021 | Franchise Business Models

If you’re a franchisor considering a merger, you’re looking for a way to grow your business. You don’t want to sell or lose your involvement, but you think that combining forces with another related company may help you both thrive in a highly competitive industry.

To decide if this is really good for your business, consider some of the pros and cons. You need to know precisely what benefits you’re hoping for and what risks to avoid.

The positive and negative sides of mergers

Let’s begin with the positive. Merging gives you a larger scope and reach for your franchise. The merger can lead to an improved economic scale. Both companies help the other do more and reach levels they would not have achieved alone.

A merger can also be a way to protect valuable trade secrets. Maybe the other company produces a part that you use in your finished product, and you’re the only one who does. Continuing to buy from that supplier is risky because someone else could start bidding on those same contracts. Merging means that you keep the technology in-house.

A merger can also help things go more smoothly and efficiently. You can cut back on some of your labor costs, for instance, and streamline communication. You can enhance your distribution network or tap into the financial resources that you need. The new, larger company is more robust than either company on its own.

Conversely, a merger may also cost money. Are the combined businesses going to need new employees or new offices? Do you need a lot of paperwork to facilitate the process? Are there going to be higher operating expenses? Nothing is free, so you have to consider the cost of the merger and weigh it against the potential advantages.

Getting the process started

If you’re thinking about a merger or the acquisition of another franchise, it’s a crucial point for your business. Getting it done right is paramount and can help you learn as much as you can about the legal side of this process.