Ups and downs are common in the corporate world. Sometimes one company may be having high profitability and market growth but sometimes, the same company may face a drop in the market demand. During this stage, if stability of the business is tampered, most of you will think of selling your company. However, there are better options than selling like amalgamation.
Amalgamation or merger is the process of pooling the resources and capital of two or more companies into a new company. The ownership of the new company will be proportional to the capital bought in by the different companies. If you are able to find similar business facing the same problems, you can join hands with them to build a new company. Some of the advantages of amalgamation are as follows.
Access To New Market
It is common in business to lose customers from a market due to the emergence of new companies or due to better strategies implemented by the existing competitors. During this situation a company has two options, one is to withdraw from the existing line of business and enter the same market with a new product. Second is to access new marketplace. Both these options would require huge capital investment. However, during amalgamation, a company will get better access to the markets of amalgamated company without incurring much expense.
As mentioned above, merger is not only the pooling of capital but also of resources. Therefore, when two companies are starting a new company together, they will have access to the best financial, technical and human resources from both the entities. It will help them to build better team with competitive personnel, try new innovations with the new technologies, etc. It will also help them to access more funds and run their business more efficiently.
Huge customer base is a complimentary benefit aroused during amalgamation. The new business will be having all the customers from old business units. It will also get more customers who are seeking better services from the amalgamated firm. Therefore, if the proprietors of the new business work efficiently, they can retain their old customers and also increase their customer base at an enhanced rate.
The above mentioned are some of the advantages of amalgamation. This strategy is not only efficient in building stability but also in increasing profitability in future.