Alliances, mergers and acquisitions, and other kinds of partnerships are an important part of entrepreneurship at every level. While the loss of control and brand identity are very real concerns for the smaller party, these marriages can be mutually beneficial fore everyone involved and can very well mean the success – or survival- of an organization and their brands.
6 Reasons To Team Up – Or Take Over
Some of the reasons for mergers and acquisitions (M&A) as well as other long-term partnerships include:
6. Create Synergy
Successful partnerships tend to be more valuable than each of their individual parts. Synergy is a an extremely over term that’s firmly in the realm of buzzwords, but in this case it makes sense. When done right, mergers can decrease the cost of running your enterprise while allowing it to be more effective at the same time. Oftentimes
5. Diversification
It goes without saying mergers can give organizations a way to do totally different things in different areas. This allows for tapping markets that you normally wouldn’t be able to reach by yourself, especially if the other business is in another industry. Diversification can also help give enterprises capabilities that they would never otherwise have had by themselves.
4. Improve Focus
Mergers can also (seemingly contradictorily) help improve a company’s focus by helping them reach parts of their own market that they otherwise are unable to get to. This happens in cases where merged enterprises serve the same market. For example, a large financial institution may buy out smaller local firms to gain better geographic access.
3. Increase Reach
In our case, we’re trying to reach out to graphic designers and artists who may need some ideas on how to effectively market their work. At the same time, we plan on helping entrepreneurs in other ventures see how visual branding and design can help their business grow.
Mergers also offer the opportunity for the two enterprises to tap into each other’s audiences, instead of having to grow them the hard way.
2. Improve Economies of Scope and Scale (Cost Reduction)
Mergers allow for some resources to be shared, reducing costs – after redundancies are addressed. You can also merge with suppliers and distributors- further reducing costs. These mergers are described as vertical integration.
1. Remove Competition
Mergers and acquisitions are rather infamously, a way to reduce competition. Fewer competitors normally means a bigger market share.
Why did we pair up with YTD? We both found that we were both talk to essentially the same sets of people. YTD’s audience of artists and designers includes a lot of freelancers and business owners – the same people we target. The Art of Small Business, due to demand, also featured a healthy dose of marketing and visual design topics making the move an easy decision.
Our partnership with YouTheDesigner is just one way we plan to deliver better content to entrepreneurs and small business owners.
Here’s to an awesome 2014!
Image credits
Pie – Vox Efx via photopin cc
Fruit picking: DG Jones via photopin cc
Diversity: Jeremy Cherfas via photopin cc
Synergy: frogDNA via photopin cc
Sources and Additional Reading:
- Investment banking explained pp. 223-224
- “Mergers and acquisitions explained”.
- Harwood, 2005
- Reverse Merger in the glossary of mergers-acquisitions.org
- Rumyantseva, Maria, Grzegorz Gurgul, and Ellen Enkel. “Knowledge Integration after Mergers & Acquisitions.” University of Mississippi Business Department. University of Mississippi, July 2002.
- [Ranft, Annette L., and Michael D. Lord. “Acquiring new technologies and capabilities: A grounded model of acquisition implementation.” Organization science 13.4 (2002): 420-441.
- Moore, Jim. “Get acquired! An idiot’s guide to technology M&A”.
- Smallbusiness.chron.com – advantages of company mergers