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What does it mean to consolidate two businesses?

On Behalf of | May 24, 2024 | Business Transactions

With the right business practices, running a company can be profitable. However, some Oklahoma entrepreneurs find they can reach greater economic heights by merging their enterprise with another company. Sometimes different business owners elect to consolidate their separate businesses.

A business consolidation is a type of merger where two or more companies combine their operations into a single new entity.

Different ways to consolidate

There are several approaches companies can take when consolidating resources. You might combine office locations, manufacturing plants or distribution centers into a streamlined set of facilities. You can also integrate the workforces of the companies under one employee hierarchy and corporate culture.

Your consolidated business might sell a combined portfolio of goods and services from the original companies. You can share customer bases or combine distribution channels. Additionally, your new business could have a unified sales organization and marketing department that promotes offerings from both companies.

Consolidation also offers you the chance to upgrade your business tech. You may unify IT systems, manufacturing technology and software tools across the consolidated business.

Potential drawbacks of consolidation

While consolidation offers compelling advantages, there are also risks to consider. You may lose your original company’s unique brand identity if the merger de-emphasizes it or even abolishes it.

Merging corporate cultures and changing long-held processes can also breed resistance from employees. This may create a culture clash between the different workforces. In general, the consolidation process involves complex operational changes that can impact productivity and customer service if not handled properly.

Consolidating businesses allows you to capitalize on synergies and economies of scale. However, this type of business transaction requires careful planning and execution to pull off successfully.