25 October 2016

To Merge Or Not To Merge? That Is The Question (For Tech Startups)

At one point or another, every business manager will ask themselves whether it’s worth merging with another company. It seems like it should be a simple economic calculation. But a lot goes into the decision. For tech companies and startups, mergers and acquisitions are a common occurrence. Tech startups often create some fantastic new product, get a patent, and then wait to be snapped up by a tech giant.

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It can be a challenging experience. So here’s some tips from those that have been through the process to see you through.

Think Carefully About Your Motives For Merging

Many small business owners start their businesses because they want to make a difference in the world. Having control over their enterprises is important, allowing them to shape their direction. But control over one’s business is often ceded during a merger. You’ll have to accept the decisions of others in determining the direction of the company. Sure, you might have more money in the bank. But is a loss of control really what you want?

Prepare Your Employees For The Change

Some of your staff will have been with you right from the beginning. Merging with another company can be a challenging time for your staff, especially if things change dramatically. As a business owner, you have to be mindful of their needs and respect their reservations. Often a merge can be a cultural shock that affects everybody.

It’s worth also taking note of the TUPE guidelines by Peninsula Group. These set out the rights conferred to workers during the merger process. Make sure that you stick to these guidelines to avoid a costly lawsuit.

Let Go Of Your Old Business

When you merge or get acquired by another company, things will change dramatically at your firm. If you’ve been at the helm for a while, this can be difficult. The first thing to do is to define your new role. Make sure everybody on your team knows your position and what you can and can’t do. Next, ensure you are clear about the new command structure. You may have to develop a new finance, marketing and sales teams comprised of people from both companies. Remember, if the merger is to be a success, team members have to be able to communicate effectively with each other. The final thing to consider is a committee to get everybody on the same page. People need to know the difference between the right and wrong course of action.

Plan Ahead For Failure

There’s a high chance that when you come to merge with another company that something will go wrong. Deals don’t always work out as planned. But don’t worry. There are plenty of opportunities to deal with any nasty surprises. Sit your team down for a brainstorming session to think of all the things that could go wrong. Use these scenarios to manage risk upfront.

Not being prepared for the challenges you might face is probably the worst strategy possible. Problems will inevitably arise for merging tech startups. So consider your options ahead of time.

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