Important Considerations for Merger Decision

Important Considerations for Merger Decision

1.    Price of Business

The most important factor is the price of the acquiring business. A comparison between acquiring a business and setting up a new business is very important to make appropriate decisions.

2.    Goodwill is a Tricky Part

In many mergers you need to pay for the goodwill. Price determination of tangible asset may be very straightforward, while goodwill cannot be calculated; rather it is estimated and negotiated.

3.    Different Business Culture

Every management has its own style to manage and run the business. How management would introduce & implement its business practices in newly acquired business is a challenge.

4.    Books of Account

Incorporate new business in books of account is complex tasks and require a lot of skills and effort of accounts department, especially, when business has been acquired during the financial year.

5.    Integration at different Level

Integration of new company with old company is also important factor for merger. Integration includes Integration of managements of both companies, integration of employee of both companies.

6.    Careful Review of Agreements

Careful review of all agreement of the company is being purchased is also important consideration. These agreements provide useful information about the future liabilities & commitment made by company.

7.    Regulator Requirement for merger

There are some companies, which are strictly regulated by the regulator. Therefore buyer must also study the regulator requirement before purchase.

8.    Taxation is complex Area

Taxation of in merger is a complex area, and requires a lot of skills and knowledge. in many cases clear tax guidelines would be not available, and confusion would prevail.