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What Happens After a Corporate Merger?

If you’re facing an upcoming corporate merger, or still considering a merger as the next step for your business, it can often be difficult to know what happens after the fact. After all, joining two businesses of any size often leads to a lot of uncertainty among employees, as well as leadership.

At Purdy & Bailey, our San Diego business law attorneys have spent more than 50 years helping business leaders navigate the process of corporate formulation and dissolution – including merging to create a whole new entity. We understand how confusing and difficult this kind of transition can be, and we’re committed to helping you scale your business in an economical, and sustainable way.

General Steps After a Corporate Merger

Although the term “merger” tends to imply a meeting of two equal corporate entities, in reality there is usually an imbalance of power, resources, and capital between the two companies that merge, more along the lines of a corporate acquisition. No matter how balanced the corporate equation, however, it can still be difficult to know how a merger will actually change the landscape – and ultimate earning potential – of your business.

In general, there are 3 kinds of merger: Vertical, horizontal, and concentric. In a vertical merger, two companies involved at different stages of a product or service lifecycle band together, eliminating costs and redundancies along the way. Horizontal mergers happen when two similar businesses sync up in order to scale and increase their share of the market, and concentric mergers allow two businesses that serve the same demographic to become a “one-stop-shop” for their customers. Depending on which merger you’re pursuing, the aftermath may look a little different, and require additional steps beyond the ones listed here.

Regardless of the type of merger you’re building, here are some of the steps you can expect to take once the negotiating is done:

  • Creating an implementation plan. Once the contract is signed and the deal is done, the first step will be to really think through the merger implementation. While some of this planning is done earlier in the M&A planning process, it’s important to review your plan again after the fact and make sure all parties are in alignment on both the strategy and the execution. Pay particular attention to changing processes and team cultures.
  • Building a transition team. Because navigating the changes can be so complicated, it’s critical to designate a “transition team” or leadership steering committee that can guide both companies through the process, and act as a primary resource for any ongoing employee questions. For the transition team itself, make sure to select individuals from both previous entities as a sign of good faith and unity.
  • Deciding on personnel changes. Unfortunately, layoffs are nearly inevitable during a merger – most estimates project anywhere between 10 to 25% of a merged workforce may be redundant. This is especially true if the merger is vertical, as there can often be serious personnel overlap where different development or service stages meet. You’ll need to take time and think very carefully about any potential layoffs, and execute them with the same care and courtesy you’d expect to be given in the same situation.
  • Restructuring. As with personnel, the structure of your old company will also need to change in order to accommodate for the new employees and the trimming of old departments. This could mean promotions for some and demotions for others, or even combining two teams from previously different companies.
  • Re-branding and design. Once there’s a new corporate entity in place, there’s the matter of re-branding. It’s worthwhile to consider outsourcing this task to a design and branding agency, so that you can start off on the right foot with new logos, fonts, brand assets, and marketing collateral. You’ll also need to ensure that your website, social media, and any other communication channels are adjusted to reflect the new entity.
  • Communicating new corporate goals. Last but not least, you’ll need to create your corporate goals and clearly communicate them throughout your newly merged company. You can rely on the transition team for this portion, but it’s also critical to decide exactly how people will communicate and receive leadership instruction within your new corporate culture.

When you need help handling any legal issues and contracts during the M&A process, just call Purdy & Bailey, LLP at (858) 360-7080. Our San Diego business lawyers are here to provide ongoing legal support for your new business!

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