What Happens During a Business Merger?

When it comes to owning a business, you want to have competition. After all, competition is what can help drive your sales up and help lead to fairer costs for customers. Sometimes, however, competition can be too much for one company. Not all companies will last forever. Some major companies wound up unable to keep up with the competition and had to merge with another to stay afloat. A merger and acquisition are when two companies combine and become one company. There are two different types of mergers, vertical and horizontal.

What Are Vertical Mergers?

Vertical mergers are mergers between two companies that may be in the same industry but have a different role in the industry. For instance, a company may absorb its supplier. If one company uses the materials of another company regularly and then one day merges with said company, this is a vertical merger. The issues that arise when it comes to vertical mergers is that if you absorb a supplier, other competitors can no longer use those materials.

What Are Horizontal Mergers?

Horizontal mergers involve two competitor companies. For instance, if two grocery store chains merge and become one, this is a horizontal merger. The problem that many people have with horizontal mergers is the ability for companies to try to create a monopoly. There are federal laws in place to restrict the creation of a monopoly. Parties can file a lawsuit to try to block a merger if they believe that it is going to cause a monopoly. This has happened in the past with cell phone companies like T-Mobile and AT&T.

How Do Mergers Handle Employees?

Mergers can be difficult for employees. Some may worry that their jobs are not secure. Often, the company will allow the employees to remain in the roles that they had. Sometimes, there may be different duties. In cases where the company has to lay off employees, they often receive a severance package.

A corporate merger can be exciting for both companies. If you are in the process of buying another business or merging your company, there are a lot of factors to consider to ensure that the entire process goes without a hitch. It can be complex to merge two companies with two separate company cultures. How you deal with employees, stocks and other issues will determine your success. For help with your merger, consult with a business lawyer, such as from Brown Kiely, LLP, today.