Buying a Business

One of the biggest advantages of merging two companies, especially if the merger is a horizontal or vertical one, is reducing competition. When two companies that operate in the same industry or offer the same product or service join together, they no longer work against each other but instead work together. The merged companies, acting as a single, larger entity, can then claim a more substantial portion of the market they operate in than they would if they continued to operate as separate businesses. 

Although at first glance, it might seem that a reduction in competition would only benefit the two merging companies and not the customers they serve, that isn’t always the case. For example, if two competing cell phone network companies merge, customers can take advantage of a larger network that offers more coverage compared to the two network companies on their own. 

In some cases, reduced competition means streamlined services. If two transportation companies merge, there might be fewer buses on the road at any one time. But that can also mean there is less congestion and less confusion for passengers, allowing them to get where they need to go with greater ease. 

Mergers can mean a reduction in costs, saving businesses money in the end. When two companies merge, they often no longer need to rent two separate office spaces, for example. They can combine marketing efforts to save money on advertising and other forms of promotion. Depending on how the companies are restructured after the merger, it can mean a reduction in the cost of staffing as redundant positions are combined or otherwise eliminated. Reduced costs can allow companies to reduce their prices which benefits customers and allows the company to expand further with increased competitive pricing. 

Merging two companies can diminish redundancies and improve efficiency all around. For example, when two or more companies merge together, there is no longer the need for each to have its own marketing department, its own research and development department, and so on. The departments can join together to work toward a common goal. 

Company A might have reached customers in one age bracket or demographic while Company B connected with customers in a completely different age bracket or demographic. When the companies come together, Company A gains access to Company B’s customers and vice versa. The merger can allow a company to tap into a new customer demographic without having to do the legwork usually required, such as research and marketing. 

Let’s say Company A serves customers in one part of the U.S. while Company B has worked with customers in another part of the U.S. Usually, setting up in a new market means a company has to undertake a considerable amount of research beforehand, including: 

• Looking for employees 
• Finding a location for an office or headquarters 

• Putting out marketing feelers to determine if that market is ready for the service or product offered by the company 

But when two companies that serve different areas merge, there’s no need for extensive research, as Company B already has a track record of reaching customers in the area not served by Company A. 

When two companies merge, each one can take advantage of the experience and intelligence of the staff at the other. For example, Company B has developed an effective way to retain customers or to follow up with customers after an initial sale, increasing the chance of a repeat sale. Instead of having to do its own investigation, Company A can use the method developed by Company B after the merger. 

Additionally, a merger can introduce the two companies to new ways of approaching or thinking about problems. Issues that might have confounded Company A might resolve after a merger with a recommendation from a person from Company B.