A mergers and acquisitions strategy is common in today's business world. However, according to CBS News, mergers "have a failure rate of anywhere between 50 and 85 percent." Therefore, to reduce risks and achieve their desired goals, small business owners must understand the basics of these transactions as the first step toward reaping any potential rewards.

What Are Mergers and Acquisitions?

A merger happens when two companies come together to form a single entity. This offers businesses an opportunity for growth or to strengthen their offerings. In an acquisition, one company buys another and assumes control over it. If you are interested in the idea of a merger or hope to eventually sell your company, developing a business plan geared toward this purpose would be beneficial. Doing so will help ensure that your business takes a solid strategic direction.

How Does a Business Plan Help Support the Strategy?

Having a concrete business plan helps businesses operate effectively and reach their goals. The plan also provides the visibility necessary for certain actions, such as making investments, implementing process improvements and providing direction for a business's future exit strategy. Business plans help prospective investors understand potential future opportunities or the unique selling proposition of the business. This becomes especially important when businesses have the strategies for mergers and acquisitions included in their plans.

Know the Goal and Plan to Get There

Depending on what business owners would like to achieve and how they want to achieve it, these expectations should be relayed to key decision makers. This will help set the foundation for future strategic direction and potential process changes to reach a desired outcome. For example, if the goal is to have another company acquire the business, the owner should detail her business's value to ensure that strengths and weaknesses are complementary to other businesses in the market. This will not only attract more investors, but it will also ensure the business is taking the proper steps to reach desired objectives.

Consider Important Facets

Business owners should consider other important facets of this strategy as well. For a merger, for example, plan to discuss such details as work culture expectations and how to integrate the new business with the existing one. This will better determine strategic fit, helping to mitigate the risk of a less-than-ideal match. Decisions on retaining current staff or changes in technology to form the new business are also important.

By considering these and other pertinent facets, small business owners can ensure they meet their intended goals and that the mergers and acquisitions process runs as smoothly possible.

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