Protecting Both Business Finances And Futures

When does a merger make sense for privately owned companies?

On Behalf of | Mar 24, 2023 | Business Transactions |

The average California business owner would consider 850 active customers a good sign of success. To have $315 million in cash on hand is further evidence that a company is doing well. This is exactly what Ouster and Velodyne, two lidar manufacturers, have achieved through their recent business merger. If you’re unfamiliar with lidar, just think “radar,” except that, instead of electromagnetic waves, its detection system uses light from lasers.  

Just as many businesses are merging, others are walking away from proposed mergers. For example, Rupert Murdoch, who owns hundreds of publishing outlets throughout the world, decided not to merge his company, News Corps, with Fox Corps, citing that shareholders would not benefit from such a venture at this time. Every business transaction is unique, and private business owners may decide to merge or not merge for various reasons.  

Factors to consider when contemplating a business merger 

Regarding the Ouster and Velodyne business merger, the fact that lidar is an integral component of most autonomous driving systems makes it a product for which there will continue to be high demand in the future. One of the issues business owners consider when deciding whether to merge with another company is how much consumer interest there is in the products the merged companies would produce.  

Private business owners may consider a business merger a viable option when joining assets creates the opportunity to increase shareholders’ wealth. The following list includes additional reasons that might make a prospective merger attractive to business owners: 

  • A private business owner may be leaning toward a business merger if it will help the company reduce costs.  
  • If a merger enables a business to expand marketing or diversify its product line, owners might be eager to meld into one company.  
  • A business owner might want to merge with another company to acquire unique assets, such as access to technology that might not be available otherwise. 
  • A business merger sometimes enables both parties to reduce tax liabilities. 

There are numerous types of business mergers and various reasons why a private business owner might want to consider it as an option. If you’re unsure whether a particular merger would be in the best interest of your company or shareholders, you might want to discuss the idea with someone who is well-versed in mergers and acquisitions.  

Mergers and acquisitions require careful legal planning 

It’s understandable that you’d want to protect your interests when you are intending to acquire or merge with another company. The high stakes of such transactions merit a careful and thorough review of the terms of your agreement to make sure that it meets your company’s needs and ultimate goals as a private California business owner.  

If you tap into the right resources to help you gather information, clarify business laws and weigh the potential benefits and downsides of a business merger, you’ll be able to make informed decisions and know when to seal a deal and when to walk away.  



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