There are many ways that business growth can happen. Two of the most common paths are through mergers and acquisitions. Whether you are a small business or a large company, merging with another business/company or acquiring a business and melding it into your current practices, can help your business flourish.

If you are considering joining another company to grow yours, you should be aware of a few things.

First, an acquisition is what happens when one business purchases another and brings that company under its umbrella. The business that was acquired gives up its independence, brand, and identity and becomes a part of the business that acquired it. In most cases, the result is worth much more than the sum of its parts. The acquiring business increases revenue and reduces the costs required by running two companies. The outcome is higher profits than the two companies had separately.

On the other hand, a merger is what happens when two completely separate companies join forces but maintain their own identities. Mergers are more common around large companies than they are among smaller companies. In the case of a merger, the two companies still operate independently and offer their products/services. But share resources such as office space, key personnel, and manufacturing space.

While it’s true that acquisitions and mergers have different intents/purposes, both of them can be accomplished through various lending tactics. The most common type of financing involves the business seeking a loan from a senior lender or bank. In this case, the lender offers cash to the business against their assets, which could be fixed assets, inventory, or accounts receivable. These assets are considered collateral and prove that the business can succeed.

Another way that a company can secure lending is through equity. This is the option that is most common in an internal acquisition within a company.

Another type of loan for a merger or acquisition is mezzanine lending. This falls somewhere between asset lending and equity lending. There is no lien placed on the assets and equity is gained through the appraised value of the company. If the borrower defaults, the lender will usually become the owner of the company.

The type of loan used in a merger or acquisition will depend on the circumstances. In most cases, an acquisition will require more funds than a merger- but there are no rules for how to finance this form of business growth. The best thing to do is contact Triport. We can help you determine the next steps you need to take when you’re looking at an acquisition or merger.