Mergers Never Work – And Here’s Why

Merging your company with another seems like a great option for several reasons.

Like the promise of expanded market share without much effort. If you’re a freight forwarder, for example, adding locations around the country can be a win for your business, and merging just seems like a simple way to do that.

Or the idea that the synergy between 2 slightly different company niches will lead both parts to better performance.

Even the assumed cost savings of combining operational expenses can be attractive enough to make you consider merging with another business.

But while the strategic benefits of merging sound promising, the practical realities often tell a different story.

Why Mergers Fail

1. Cultural Clashes: When two companies merge, different corporate cultures and philosophies can clash, leading to internal strife, miscommunication, and a dilution of the company’s core values. If you’re not used to thinking about your company culture and how unique it is, you’re likely to be caught off guard by how ingrained, and important it is.
2. Integration Issues: You’re sure to have made investments in technology in the past – and remember the headaches during the implementation. Imagine merging systems, processes, and teams that all use a different approach. Even the process of merging can result in significant inefficiencies.
3. Hidden Costs: The financial burden of a merger can be underestimated. Hidden costs such as legal fees, restructuring charges, and lost productivity can quickly mount, diminishing the expected financial benefits. Especially when cross-state tax and conflicting employment policies result.
4. Loss of Focus: In pursuing a merger, companies might lose sight of their primary objectives. This distraction can lead to missed opportunities and a weakened market position.
5. Customer and Employee Turnover: Mergers often create uncertainty and discomfort for both customers and employees, leading to reduced loyalty and the potential loss of both, which can hurt the business in the long term.
6. Mismatched Motivations: You may be merging thinking that the presence of other C-Suite level thinkers and doers will reduce your workload, leading you to a kind of semi-retirement. Your merger-partner might have the same view, or be relying on the injection of YOUR time and talent to help fuel growth. Both can’t be true.

7. Lack of Equality: It’s rare that completely equal businesses merge. And because of that, if you’re the smaller party your influence, direction and utility WILL diminish. Operational efficiencies (ie, staff reductions) will fall more heavily on the smaller business than the larger. And that causes resentment between the remaining personnel – lower job satisfaction, higher turnover, etc.

Exploring Alternatives: Selling Your Business or Buying Outright

While merging may seem like a viable option, selling your business or acquiring another can offer clearer, more controlled pathways to achieving your strategic objectives.

Selling Your Business:

Selling can simplify the transition process and provide immediate financial benefits without the complexities of merging cultures, systems, or operations. It’s an attractive option for business owners looking to retire, reduce their operational responsibilities, or capitalize on their investment during peak market conditions. Selling can result in a straightforward payout that allows the former owner to pursue new ventures or enjoy retirement.

Buying Another Business Outright:

For those looking to expand, buying another business outright can be a powerful alternative to merging. This approach allows you to selectively target companies that align with your strategic goals without having to compromise on your business’s core values and operational methods. It enables tailored expansion, where integration is managed on your terms, potentially minimizing the integration issues seen in mergers.

Strategic Benefits of These Alternatives:

• Control: Maintain greater control over the outcome of the transaction.
• Simplicity: Avoid the complexities and risks associated with merging two separate entities.
• Alignment: More effectively select opportunities that align with your business’s strategic needs and culture.

By choosing to sell or buy outright, you navigate around the pitfalls of mergers, leveraging opportunities that better fit your business’s trajectory and personal goals.

At Albion Mergers and Acquisitions, we specialize in guiding business owners through these alternatives, ensuring that the path chosen not only maximizes value but also aligns seamlessly with your future aspirations.