Merging a business has always been filled with complexity. With a number of moving parts, stakeholders and paperwork, it can seem like a minefield. Mix in doing it overseas, and you’ve got a recipe for a potential headache.
A situation often cloaked in mystery and confusion, there are a number of factors to consider if you’re looking to merge with another business overseas. Regardless of how good of a position you feel as though you sit within the process, in this article we’ll be taking you through the ups and downs of merging with someone else.
What is the process of business mergers?
A merger generally occurs when a company finds a benefit to combining business operations with another, in a way that will contribute to increased shareholder value. In many waysthey’re similar to an acquisition, which is why the two are often grouped together as mergers & acquisitions.
When a merger of equals happens, two companies convert their respective stocks to those of the combined company. In practice, these two companies will make an agreement for one company to purchase the other company’s common stock* from the shareholders, in exchange for its own common stock.
*Common stockis a security that represents ownership in a corporation.
It’s important to remember in a merger, regardless of whether it’s local, national or international, leaders in a business come and go, so don’t assume that just because one is committed to the new company, that a newcomer will be too. If you're a buyer or seller, Stoneridge Partners will make sure your Healthcare Merger & Acquisition is a successful transaction
What are the benefits of multinational companies?
Where efficiency is concerned, multinational companies have a wealth of benefits. They’reable to reach their target markets much more easily as they tend to manufacture in the countries where the target markets are located. They also have different stages of the supply chain located in different countries. This means they’re able to specialise production in countries where it has a comparative advantage.
A company of any size will benefit from being global as it touches on numerous economies too. It can push production in one country when others take a dip and vice versa. They’re also able to hire skilled labour from across the globe, gaining the brand recognition they deserve.
What challenges do businesses face when looking to merge?
Regardless of how successful companies that are merging may be, there are still challenges faced by all parties involved. In some cases, large-scale mergers or those that operate in small markets can destroy fair competition by giving the post-deal businesses too much power.To monitor this is The Competition and Markets Authority (CMA). They are responsible for reviewing the potential impact of these deals on the market, and has the right to prevent mergers or acquisitions from taking place if it would have a negative effect on consumers, the market or the economy.
Recently, business consultant experts RSM Global were approached by an Italian multinational company needed assistance restructuring their two South African entities. They were instructed to merge the two South African entities in the most tax efficient way, taking into consideration the legal nature of the merger, and also provide extensive advice around the operational merger of the employees from each entity. The brief to RSM was to merge the two South African entities, in a tax efficient way, taking into consideration the legal nature of the merger, and provide extensive advice regarding the operational merger of the employees from each South African entity.
Regardless off the brief given, RSM Global managed to oversee the integration between the two and serviced all their requirements from tax, legal and accounting to human resources and industrial relations.