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How to get ready for a small-business merger

As an owner of a small business, you likely have high hopes for your enterprise. You may now find yourself facing the opportunity to merge with another successful company to the benefit of both.

There are many advantages of merging businesses, but there are many pitfalls, too, if you do not handle the process correctly. These tips will help you get ready.

Create a vision

First, be clear on the purpose of the merger, as it will direct your choices throughout the interaction. If you have a distinct picture of what you want, you are likelier to get there and avoid making errors. For example, if you like the other company's management team, then you have to retain its leaders, and you may need to cut some of your own to reduce costs.

Determine which assets from both companies are worth focusing on. Check that you two are the right fit, too, by reviewing your values, goals, culture and communication.

Get your affairs in order

No one wants to join with a business that has unresolved issues. Ensure the status of taxes and other finances and check the accuracy and organization of your records. Efficiency and responsibility make your business more attractive and easier to merge with.

Establish a plan

Merging is a lot more complex than just signing a contract. You need to establish a plan with a timeline to stay on track and prevent missing steps. You have to decide who needs to know about the merger (including clients) and when. You also must reorganize the hierarchy of the combined business, update policies and procedures and make changes to pay. Remembering the details helps things go smoother.

Protect your business

Not all mergers end happily ever after. In case something goes wrong, have an exit strategy. Also, read the fine print of your letter of intent to review any consequences of backing out of the merger before it is complete.

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