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Mergers and Acquisitions


The law firm of Michael T. Chulak & Associates can assist your franchised or non-franchised company successfully complete a merger or acquisition anywhere in Southern California. This may include assisting you in finding the right business to acquire, a suitable merger partner, raising equity and/or debt financing, and providing necessary legal services.

While the terms merger and acquisition are often used synonymously, the terms are not the same.

A merger takes place when two firms agree to combine into a single new company rather than remain separately owned and operated. When an acquisition takes place, one company remains in business while the other ceases to operate as a separate, business. While an acquisition, technically and legally results in the dissolution of the acquired firm, it is common for the management and employees of the acquired firm to become an important part of the firm that made the acquisition.


Reasons for Mergers and Acquisitions

Mergers and acquisitions take place only when both parties believe the value of the combined firms will be worth more than the sum of the two firms operating separately. If value is created as a result of a merger or acquisition, the owners of both firms can profit by the transaction.

Some of the reasons cited for mergers and acquisitions include:

Often the combined company can reduce its fixed costs by eliminating duplicate costs, operations, and departments. Operating costs as a percentage of gross income can usually be reduced, improving the bottom line.
   
Often special knowledge and experience of the owners and/or senior managers can be put to greater and more profitable use with a larger business and more employees. This is a form of leverage.
   
When a company is larger, its cash flow tends to be more stable because the number of transactions taking place during each accounting period usually increases.
   
Additional locations help the company improve its service to existing clients / customers and attract new ones. Your company also becomes more visible which helps to attract new business. More locations result in geographical diversification which is also beneficial.
   
More efficient use of the combined office or retail space can usually be accomplished adding to the bottom line.
   
A larger company usually makes it easier to recruit and retain valuable employees. Employees generally feel more secure with a larger company and one that is growing. Increased market share gives you an advantage over your competitors.
   
More efficient and effective utilization of employees is usually possible. This results in lower operating expenses. A larger firm makes it easier to maximize the use of employee skills.
   
Your personal lifestyle is likely to improve with a larger business operation. A strong second in command, makes it easier and more practical to take days off or plan vacations. You can be more confident that being away from the business will not have negative consequences. Your family life is likely to improve.
   
Obtaining financing from banks or credit from suppliers and others is likely to be easier and the terms offered are likely to improve. This will improve your bottom line and make it easier to grow your business.
   
Access to a new customer / client base is likely to improve your profits.
   
Cross selling opportunities may be created when the combined firms have been selling complementary products or services.
   
Purchasing economies may result due to the increased size and frequency of purchases. It is easier to negotiate better prices when you purchase in larger quantities.
   
If a significant competitor is being absorbed, it may make it easier to increase the price of the product or service being offered.
   
If the two or more firms merged together offer different products and/or services, the diversification will create a more stable operation.
   
A business that merges with a supplier, no longer has to pay the supplier since they become one entity. Thus, any profit is kept inhouse.
   
A merger or acquisition may be the first step towards positioning a small but successful company so that it can sell franchises through a newly formed franchise company.
   
A merger may be exactly what is needed to implement your estate plan and/or retirement plan.
   

Growing your business through strategic mergers and acquisitions can result in rapid growth without the need for a large cash investment. If the right companies are selected for mergers and/or acquisitions, owner equity and cash flow can be increased with each transaction. Keep in mind that it is absolutely possible to merge three small firms, that are not performing well, into one large firm that is dominant in its market and highly profitable. Please visit Barter for Legal Services.

We believe that most business owners would rather own a significant percentage of a large, rapidly growing, profitable business than 100% of a small, marginally profitable business. If you agree - consider a merger or acquisition.

Call us today for a no-cost consultation regarding mergers, acquisitions, or any other business-corporate legal matter. We may be able to assist you in arranging the perfect business marriage.

While most types of firms can be profitably merged or make profitable business acquisitions, we believe the following types of firms are well suited for fast, profitable growth using mergers and acquisitions:

Residential Real Estate Brokers
   
Law Firms
   
Business Opportunity Brokers
   
Community Newspapers
   
Mortgage Brokers
   
Property Management Companies
   
Insurance Brokers - Agents
   
Commercial Leasing Brokers
   
Print Advertising Magazines
   
Security Alarm Companies
   
Co-op Mailing Companies
   
Security Guard and Patrol Companies
   
Bookkeeping Services
   

Examples of Mergers and Acquisitions

Three small franchised real estate brokerage offices merge into one larger corporation under one name. Their greater market presence, total advertising budget, elimination of duplicate costs, and larger combined sales force, allows them to attract additional, successful sales agents, increasing their overall profit.
   
A small law firm consisting of three highly experienced attorneys is struggling to bring in enough legal business to keep them busy. They merge with a law firm that has the proven ability to consistently generate a larger volume of legal business. All of the attorneys and their clients benefit by the merger.
   
Two small local newspapers in nearby towns are marginally profitable and find it difficult to attract and keep good advertising salespeople. They merge into one media company. They find that their two largest operating expenses, printing services and paper, are reduced because of their increased volume. They also find that attracting and keeping ad salespeople is easier because the salespeople have more options to offer customers and they can earn more money.
   
Three small property management companies within 25 miles of each other merge to form one large property management firm. They find that the larger company is able to attract larger more profitable management accounts and that the combined expertise of the firm makes it easier to attract a more diverse portfolio of larger property management accounts. Having an office closer to prospective clients also makes growth and client retention easier. Duplicate costs can be eliminated and profits increased.
   
A security guard and private patrol company merges with a security firm that installs surveillance cameras, alarm screens, and burglar alarms. Since both firms are marketing related products and services to the same types of clients, the same sales staff can sell the entire line of products and services, increasing efficiency, sales revenue, and profits.
   
 
 





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