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I’ve been approached about a merger. Should I consider it?

Wednesday, 24 November 2010 | By Reuben Buchanan

My new IT business is flourishing and has pulled in several big-name clients. A more established business has approached me regarding a merger. The financial consideration is quite attractive, but I’m worried about being sidelined by the merger and my ideas disappearing. What should I do?

 

Maybe as an idea, to maintain some separation the deal should be done like an acquisition – ie. they acquire a stake in your business.

 

You maintain your independence – your brand, staff and culture and even operate from a separate premise. You leverage in the benefits from having them involved such as distribution, client access, R&D, head office support, etc.

 

Eventually they might acquire the rest of the shares from you if things go well. If you merge together there is often a clash of culture which can sometimes dilute the business. This way you get most of the benefits, without the potential risks that a merger might present.

 

Speak to a commercial lawyer who has specific experience in M&A and get them to advise you on the best option and potential risks. From there you will be able to make an informed decision.

 

This is not a common problem for start-ups as they are rarely acquired or merged with. Being acquired or merged and the resulting culture clash issues are pretty rare for a company less than five years old.