When a business merger takes place, there are many factors that come into play to ensure all parties emerge from the deal in the best possible shape financially. To accomplish this, more and more companies today are turning to private equity firms to handle mergers that are large and complex. If you are wondering about the benefits that come with using a private equity firm for these important business deals, here are four you should keep in mind should a merger be in your company’s future.
1- Operational Improvements
Should your company be involved in a leveraged buyout, a private equity firm can be invaluable in that it can help finance operational improvements that will ultimately add a high level of value to the company that has been purchased. Since the private equity firm will often have years of experience with similar mergers, it will know exactly what moves to make in order to make sure your acquisition becomes as profitable as possible.
2- Capital Gains for Investors
When you use a private equity firm for a merger, it is important to realize that the goal will be to buy the other company at a low price, make the necessary operational improvements, and then at some point sell the company for a much higher profit. In doing so, the PE firm is able to generate capital gains for investors. Since PE firms usually handle mergers with varying investment plans that may be five or 10-year timeframes, they are able to work well with investors who have a variety of investment strategies and financial goals.
3- Quick Way to Expand Your Business
When you partner with a private equity firm to merge with another company, it will be a quick way to expand your business through the immediate addition of new products and services. In addition to this, your company will also instantly gain a whole new set of customers who can add substantial profits to your business in both the short and long term. The merger will also let you look at expansion into new markets and areas, potentially allowing you to go from a regional company to one that has a worldwide presence within perhaps less than one year.
4- Track Record of Success
Last but certainly not least, using a reputable private equity firm will have you working with a firm that knows the ins and outs of mergers and has a track record of success handling these complex business deals. Using its ability to identify possible risks and liabilities associated with the merger, the PE firm will also be able to quickly implement cost-cutting measures that will over time make the deal more profitable. These may include reducing the workforce, installing more efficient equipment, or other related factors.
If a merger between companies is not handled properly from the beginning, numerous problems can be created that will greatly reduce profits for you and your shareholders. By partnering with a PE firm, the deal can be handled smoothly and generate much higher profits.
