Last weekend I was going through an article published in the magazine ‘Business world’. It was all about the biggest ever acquisitions made by Indian startups. From there a question raised in my mind that forced me to think that what is the need of start-up if it gets merged with other companies. So, after spending almost 2 weeks, I came up with few insights about the aforementioned concept.
According to the Report “over 71 mergers and acquisitions took place during January-June 2017 and over 343 merger and acquisitions have taken place in India since H1 2015.” (Source – Funding Report By inc24.com)
Should Startup merge with Big Companies… Yes / No ?
As we all aware that today’s business world is full of cut-throat competition, so surviving and doing a business in such competitive world is quite a daunting situation, especially if it is the startup. In order to elevate the growth of their business, startup companies are looking to merge with other companies. Besides improvement in growth, there are many other reasons:
Establishing a startup business in this era is not an easy nut to crack. To scale your business, you need good capital and credit. Getting loan and credit from the bank is a hard task as well. Thus, the best solution to get capital or credit is by merging with other companies. In fact, it has been considered that ideal merge working on the principle 1+1 = 3 can increase the revenue and attract more capital and funds.
Another reason that startups are merging with companies is efficiency and productivity. As one and one make eleven, similarly synergies between the two companies can not only increase the efficiency and profitability but, it can also reduce the additional operational cost. Thus, merging two firms together cannot only help reduce the time, but it also saves manpower efforts.
Increase Customer Base
Every person does business with the aim to earn money and reputation. They look for different options to strengthen their online customer base. Building strong customer base for a startup is quite time consuming and daunting task. Ideal merging is the perfect solution to acquire a strong customer base in this case.
Is Merging, the only solution left to augment your brand in the competitive market. Even though merging can provide you with the high-end business capabilities, but it is important to know that merging has some anomalies as well. It is being said that “Startups can easily be romanced by the idea of getting tied up with a bigger company” because big companies have the funds to spend on development and marketing. These companies will not bring the benefit; the startups are expecting.
So, merging startups is disruptive to the business. Personalities can be hard to deal with, and integrating will get the companies eye off the ball. Failure becomes a higher probability. So, if you are planning to merge your startup with any firm, just read this once to know that how merging is affecting the companies.
Read the below points and then jump to a conclusion.
When two companies merge, their work culture merges too. An organization having two firms with different work culture has more chance of Culture Clashes. For instance, if a company with a flat hierarchy is merged with high hierarchy organization, it might lead to disarray.
Create Distress among Employees
Merging two firms together can help reduce the time & manpower efforts. Through this, merged companies can reduce the number of staff performing the same duties in order to save the cost of the company. But the biggest anomaly of this is Layoffs. Such thing creates fear of losing jobs among employees, as a result, they may lose their interest and reduce their productivity.
If needed to merge startups with big companies, the most important thing is to make sure both parties are assured as to why the deal has been made, the execution plan, budget, and timeline, to make sure no disappointments by either party post-transaction. Make yourself aware of all potential pitfalls to avoid catastrophic situation.