Today, businesses in Baton Rouge and other cities across the nation make major decisions to not only improve the business itself but also make it more profitable. For some companies, the best way to achieve that is through a business merger. However, there are many risks to consider when entering into a joint venture.
When two businesses decide to merge, many questions will surface, such as the type of partnership or business combination that will exist, how it will be managed over time, what will the profits look like from this venture and what investments will be made. While these are important questions to consider and answer, before terms are agreed to and an agreement is signed, it is important that the parties to the merger make sure their interests are known and protected.
In order to protect individual value and create joint value in a merger, there are three things to consider. And by meeting these points, a joint venture could become successful. First, when businesses are considering a merger, it must be clear that there is a potential to create more value together versus each party on its own. If there is no value in partnering up, then a merger will serve little to no purpose.
Next, once it is clear that a merger is valuable to the parties, the merger must be designed and managed in a manner that would create joint value. If the merger doesn’t fit the goals of both parties or there isn’t an agreement on managing risks, then a merger might fail.
Lastly, once joint value is established, this should motivate the parties to contribute to the entire merger process. This is when terms of the agreement will be addressed and negotiations will take place. However, by taking these three steps first, a business merger could prove to be more successful and profitable.
Nonetheless, even when businesses take caution and timely consider agreements to a business merger, business law issues could arise. Because of that, it is important that parties to the merger understand how to address these matters. Whether it could be solved through negotiation, arbitration or litigation, it is imperative that the parties are informed of their options.
Source: Hbr.org, “Making Mergers, Acquisitions, and Other Business Combinations Work,” Benjamin Gomes-Casseres, accessed on Jan. 11, 2016