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Updated: 2016-08-04 16:40

Business mergers and aquisinions

BUSINESS ACQUISITION

Buying business that is already in operation represents less risk and no need to wait until the business will gain momentum, safer investments. But when buying already existing business, it is important not to overestimate it and to consider possible threats. Finding the right business for acquisition can also take considerable time.

Main advantages of business acquisition

Main disadvantages

Business start-up tasks have already been completed, it is easier to get financing for business development, products or services offered for the market are already known.

Marketing tools have already been tested and proved to be effective.

Effective human resources

Many other problems common when starting business have probably been solved, optimum solutions have been found, possible mistakes have already been avoided

Business acquisition will probably require big investments at once, including the price of the business to be acquired, experts’ fees, etc.

A new owner may not avoid certain managerial mistakes, additional business financing may be needed

Reaction of the existing customers, partners, employees to the change of the owners and the extent of the impact on the outcomes are not clear 

MERGERS AND AFFILIATIONS

The following types of business consolidation are possible:

1. Affiliation - is connecting one or several companies to the other company already in operation, to which all the rights and duties of the company reorganised through affiliation are transferred.

2. Consolidation - is combining two or more companies into a new company, to which all the rights and duties of the reorganised companies are transferred.

Usually legal entities of the same legal form can participate in mergers of legal entities (e.g. PLC can merge with PLC only).