Pros and Cons of Mergers and Acquisitions

Pros and Cons of Mergers and Acquisitions

As any business school student can tell you, mergers and acquisitions are commonplace in contemporary business. Unlike bygone times when savvy up-starters would open a business and run it themselves until handing it off to ready and willing family members on their deathbed, modern entrepreneurs know that mergers and acquisitions are commonly part of the process. Today, professionals Gregory Adams, Cary Kochman, and Jordan Cahill dedicate entire careers to this area. While mergers and acquisitions can be a good thing – providing a hefty payout to business owners who have parted ways with their business babies – there are also some cons to consider when trying to decide if a merger or acquisition is right for you.

Pro: Network Growth

Although bigger isn’t always better, having an expansive network can definitely help when it comes to satisfying customers’ needs. When businesses merge or one business acquires another, the network expands, which often means that customers receive better service.

Pros and Cons of Mergers and Acquisitions

Con: Less Choice

When businesses merge, customers now have only one choice where there used to be two. This can present a problem if the company in question takes advantage of this situation and hikes up prices or pays less attention to customer service, believing that they no longer have to worry about losing customers because customers have nowhere else to go.

Pro: Duplication Limitation

Competition is always good, but when businesses join forces, they can sometimes provide better customer service through the reduction of duplication. When businesses work as one to provide a service, they can commonly do so at a lower rate. This ultimately trickles down to the customers, who benefit from decreased fees.

Con: Job Loss

When businesses merge, some employees might very well end up out of a job. Business owners can often minimize the impact that mergers or acquisitions have on their dedicated workforce by negotiating staff retention into the agreement.

Pro: Saved Development Costs

When one business merges with or acquires another, the developed portfolios of those businesses meet. This means that business owners can allocate less funding to product development because they now have the products developed by their competitors. This advantage is substantial because development can be an impactful budget line item.

Con: Employee Unease

Most people don’t like change, and a merger or acquisition is a major change. Even if business owners ensure their employees that their jobs aren’t in jeopardy and that nothing will change, employees are typically apprehensive in the face of a merger or acquisition. Some employees respond to these feelings of apprehension by seeking other employment, which means that you might lose some of your employees during the process.

Pro: Skip the Hiring Process

If both companies involved in the merger or acquisition have crops of outstanding employees, business owners can save time and money by working to retain all of these workers, thus reducing the likelihood that they have to move through the hiring process at any time in the near future. Seeking and acquiring candidates is expensive and time-consuming, so this can have an impact on businesses’ bottom lines.