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What are red flags in business mergers?

On Behalf of | Jan 31, 2022 | business law

To take your business to the next level, you want to join forces with another company. If this represents your first merger, you deserve to know how to protect your entity and business interests.

Inc. explores several signs that a business merger could end in disaster. Learn how to set yourself up for success rather than disappointment.

Mismatched business models

Before signing on the dotted line, fully understand the other owner’s business model. When you both operate in lockstep regarding the industry you operate in, you could enjoy greater success. If you have conflicting business models, you may find you never quite get in sync.

Contradictory company cultures

When you view business mergers as marriages, it makes sense that you do not want to pair yourself with a business that does not share your company culture. Your cultures need not be a perfect match, but they should at least complement each other.

A purchase price that makes the news

Think about how much money both companies plan to invest in the merger. If the price makes the news, it should be for all the right reasons. Sometimes, spending a massive amount of money puts pressure on the acquiring firm to get a good return on investment by any means necessary.

Feuding CEOs

The CEOs of both companies need not be the greatest of friends, but the new business entity must get clear on who acts as the new CEO. When company leaders feud or try to occupy the same space, the confusion may trickle down to the employees, who may feel like they must take sides to protect their positions.

Leave no aspect of your business merger unexplored. Identifying red flags sooner rather than later could help keep your business dreams alive.