Can Small Businesses Merge and Acquire?

The answer is definitely yes. The first advantage that arises from merging is the increase of economies of scale. Economies of scale do not only increase in terms of the balance sheet but more so in terms of the human resource. For small businesses it is also likely that the balance sheets may have no much glory to show, however, the different shareholders may combine their intellect, experience and that of their personnel to develop a much stronger business.

What big businesses are looking for in mergers and acquisitions, small businesses must seek to replicate in their smaller scale and strength. The problem with most upcoming entrepreneurs is that they want to own their businesses 100% either as individuals, families or friends. They may continue to own 100% of a business that spends 10 years generating a turnover of R0 - R50 000.00 and R0 - minus R50 000 loss a month foregoing the opportunity cost of merging, owning a lot less than 100% of the business or even lower than 50% and be part of a company for example that generates a turnover of R1m and say R100k profit per month something which a merger can bring in terms of economies of scales (financial and intellectual).

Having said that it is not automatic that a merger or acquisition will be successful, one still needs to do their due diligence in choosing new partners and thereafter to work hard to produce the desired results.

By Gibbs M. Nare - Entrepreneur and Business Mentor, Iso Labasha Holdings

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