There are many benefits to businesses merging to form a brand new one which can benefit both the businesses and their customers.

One of the major benefits to the businesses is that there is a reduction in the amount of competition. This will mean that there are less businesses to compete with for market share and therefore an increase in profits. This increased profit will allow for reinvestment into the business in aspects such as research and development. This can therefore result in better quality goods or service being provided.

Another positive result of merging with another business is that it can benefit from different economies of scale.

This will include:

Technical economies – meaning that the fixed costs can be smaller on average across the whole business
Bulk Buying – A larger business will potentially need to purchase more stock meaning they are able to bulk buy and therefore reduce overall costs
Financial – A business that merges will therefore have higher funds and this could mean that they benefit from larger interest payments

As well as potential financial benefits, another advantage of a merger is having the ability to draw on expertise and experience within the sector/industry. The newly merged business will be able to offer a greater depth of resource and breadth of service. It will also provide a stronger base upon which to develop a range of services to meet changing business needs.

For advice and further information regarding mergers, please do contact me at bryan.elkins@krestonreeves.co.uk or on 01403 253282.

Bryan is a partner based at Spofforth’s Horsham Office and leads the Tax Consultancy Team. He is on the management team for Spofforths Private Client Services LLP, working closely with a range of Spofforths departments, the Financial Services Team and the Corporate Finance Team on Mergers & Acquisitions; all of which link directly with tax advisory at various levels.

Spofforths, Springfield House, Springfield Road, Horsham, West Sussex, RH12 2RG