How to merge two businesses

Discussion in 'Growing and Managing a Business' started by dnrjon, Jan 14, 2010.

  1. dnrjon

    dnrjon
    uix_expand uix_collapse
    New Member

    Joined:
    Jan 14, 2010
    Messages:
    7
    Likes Received:
    0
    I started an alternative energy business on the side about a year ago. I currently work for my dad at the family electrical business during the day. I'm finding it VERY hard to juggle both at the same time. That being said, my father and I have been discussing the main company buying my company. My company doesn't have many assets or capital.
    My company would mainly be used for name recongition. What steps would we need to take and what kind of fees would be involved?
     
  2. DEADMAN

    DEADMAN
    uix_expand uix_collapse
    Member

    Joined:
    Apr 5, 2008
    Messages:
    641
    Likes Received:
    3
    Welcome to BusinessAdviceForum.

    Two business would be easier to be merged if they're relevant to each other. However, alternative energy and family electrical business would be possible if you start a shop for it. You may try selling products of both business and sometimes try to repair them too considering it as normal side business. The cost is with your shop installment with products.
     
  3. Fergal

    Fergal
    uix_expand uix_collapse
    Premium Member
    Premium Member

    Joined:
    Nov 18, 2007
    Messages:
    10,575
    Likes Received:
    1,165
    Welcome to Business Advice Forum dnrjon and thanks for posting your business questions. What type of services does the family electrical business provide? Is it an electrical contractor business? Do you provide services for home owners, other businesses or both?

    Is your aoternative energy business focused on a single energy source, such as wind power or solar power?

    If you can please post back with a little more info I will reply with more helpful suggestions.

    Some ideas that you might also consider are;


    • Forming a partnership with the electrical business, rather than them buying you out. In that way you would have a share of a larger business rather than receiving a once off payment and then being an employee.
    • Asking your Dad if you can have some more flexibility in your job, so that you can focus more on building your own alternative energy business.
     
  4. anissa34

    anissa34
    uix_expand uix_collapse
    Member

    Joined:
    Jan 14, 2010
    Messages:
    31
    Likes Received:
    0
    Hi

    Merging two businesses means there'll be more than one person to share in any profits or losses the new business makes, therefore, you need to agree how much equity each person has in the business.

    Work out how much each individual business was worth on its own, also consider how much work each of the new partners will put in as well as any new money being invested in the new business.

    Based on those, agree on the new equity share, put it in writing and ensure each partner signs.

    You may also consider a new name for the business, one that reflects the merger of the two companies.

    Thanks
    Have a nice time ahead.
     
  5. dnrjon

    dnrjon
    uix_expand uix_collapse
    New Member

    Joined:
    Jan 14, 2010
    Messages:
    7
    Likes Received:
    0
    Thanks for all your help.
     
  6. dnrjon

    dnrjon
    uix_expand uix_collapse
    New Member

    Joined:
    Jan 14, 2010
    Messages:
    7
    Likes Received:
    0
    I'm selling grid tied solar systems as well as a small wind turbine. Asking family for more time for yourself is a hard thing to do, especially when they're providing your family with your base income.
    We have signed contracts on 2.1 M in work . It's just the both of us managing the workers,paperwork,and billing. I personally think we need a hand in the office, but my old man is very frugal( product of the early 80's). My main objective lately is to not anger our customers.
    So far so good.
     
  7. Fergal

    Fergal
    uix_expand uix_collapse
    Premium Member
    Premium Member

    Joined:
    Nov 18, 2007
    Messages:
    10,575
    Likes Received:
    1,165
    I would say that there are very many recently bankrupt business owners who wish that they had shared your Dad's frugality. Watching your costs is very important, especially when we are experiencing difficult financial times. Congratulations on winning those contracts.

    Perhaps writing out an agenda and arranging a meeting with your Dad, could help a lot.

    Have you given any further consideration to the partnership idea?

    Does your Dad have any involvement in your alternative energy business?
     
  8. dnrjon

    dnrjon
    uix_expand uix_collapse
    New Member

    Joined:
    Jan 14, 2010
    Messages:
    7
    Likes Received:
    0
    Sounds like a good idea. I think a stake in the main company is something that should be done anyway. He's 55 years old and is going to have to pass to batton sooner or later.
    On one of our projects, 30% of the total contract is solar. He is simply sub contracting the solar portion to me.
    Intially My father thought the technology was going to be a "fad" just as it was in the early 80's , but it is now becoming part of the standard scope of work on many projects. So I think he is warming up to it.


    thanks again
     
  9. Fergal

    Fergal
    uix_expand uix_collapse
    Premium Member
    Premium Member

    Joined:
    Nov 18, 2007
    Messages:
    10,575
    Likes Received:
    1,165
    You are lucky to have your Dad to learn from and work with. He obviously has a lot of abilities and I congratulate him on having built up the business to it's current level. Working with and doing business with family members can be challenging and even confrontational at times. However, the fact that you know each other and trust each other so well is a great bonus. I wish you both the very best of luck with these issues.
     
  10. Clinton

    Clinton
    uix_expand uix_collapse
    Member

    Joined:
    Jan 16, 2010
    Messages:
    66
    Likes Received:
    1
    anissa34 has some sound suggestions on equity.

    If, however, you're not looking for a partnership and your dad wants to buy you out, the first step is to establish the worth of your business. This is very subjective and deals often collapse because buyer and seller can't reach agreement on a figure. Perhaps what you and dad could do is agree a neutral third party to do the valuation - that way there is can be no future accusation of over-charging or stealing. It's important that both parties agree to abide by the decision of the mutually agreed valuer. Your accountant may be able to help with that as would your local business link.
     
  11. macomb

    macomb
    uix_expand uix_collapse
    New Member

    Joined:
    Jan 19, 2010
    Messages:
    6
    Likes Received:
    0
    two business will merge together for a few different reasons.some of these are so that they can cut down on certain costs, the corporations as a team may become more valuable if they merge together, the one that will not exist anymore may have been having some troubles, etc.
     
  12. dnrjon

    dnrjon
    uix_expand uix_collapse
    New Member

    Joined:
    Jan 14, 2010
    Messages:
    7
    Likes Received:
    0
    I again appreciate the advice. I think we are going to move forward with the merger. I have recently hit another hurdle, I can't get credit. I have even personally guaranteed the accounts. Man have times changed, and I have a 790 credit score as well. With that said I think I'm running out of options.
    The main topic that keeps coming up is the cost. Is a merger something that you would need a lawyer for? If not can we just put an agreement in writing, have it notarized ,and Change the ownership with another article of organization filed with the State of Maryland?
     
  13. dnrjon

    dnrjon
    uix_expand uix_collapse
    New Member

    Joined:
    Jan 14, 2010
    Messages:
    7
    Likes Received:
    0
    I know there won't be any issues about money. I am fortunate to have a great relationship with my father. I have worked for him for 15 years and we have a policy of saying exactly whats on our minds and dealing with any issues immediatly before it gets out of control. I have seen business partnerships between friends and they never work. I think this is different, plus I know this will make things allot easier for me. I can then focus on ramping up marketing and securing more contracts.
     
  14. Fergal

    Fergal
    uix_expand uix_collapse
    Premium Member
    Premium Member

    Joined:
    Nov 18, 2007
    Messages:
    10,575
    Likes Received:
    1,165
    dnrjon, in most cases it is better to get professional legal advice for a merger between two companies or indeed for any business partnership. What you could do is compile a written agreement for the merger and then discuss this agreement with a professional legal adviser.

    You say that you can't get credit and you also mention that there won't be any money issues. Do you still need credit and if so, what do you need the credit for?

    Good luck with the merger, it sounds like a very exciting business opportunity.
     
  15. jjaysonn42

    jjaysonn42
    uix_expand uix_collapse
    New Member

    Joined:
    Dec 31, 2009
    Messages:
    6
    Likes Received:
    0
    "Rightly marked for sure!!!:)
     
  16. dnrjon

    dnrjon
    uix_expand uix_collapse
    New Member

    Joined:
    Jan 14, 2010
    Messages:
    7
    Likes Received:
    0
    What i meant by money issues is that my father and I will not fight about shares or the amount he would have to pay me. as far as the credit statement ,I don't have that much capital avalible so therefore I need a credit line of some sort.
     
  17. Fergal

    Fergal
    uix_expand uix_collapse
    Premium Member
    Premium Member

    Joined:
    Nov 18, 2007
    Messages:
    10,575
    Likes Received:
    1,165
    People rarely fight about money when everything is going smoothly. However, money can become an issue if times become difficult or relationships stressed. Hopefully this would never happen between you and your father, but having a written agreement, that you are both happy with and physically sign off on, can do a lot to reduce the chances of disagreements over money.

    As regards your line of credit, have you spoken to an accountant or your bank on this issue?
     
  18. stepheny

    stepheny
    uix_expand uix_collapse
    Member

    Joined:
    Jan 19, 2010
    Messages:
    29
    Likes Received:
    2
    Two corporations will merge together for a few different reasons. Some of these are so that they can cut down on certain costs, the corporations as a team (made into one) may become more valuable if they merge together, the one that will not exist anymore may have been having some troubles, etc. Usually, it is so that the corporation can become more valuable.

    One of the first decisions that will need to be made is to decide which one of the corporations will be left as the head of the two combined? This includes all liabilities to the new corporation, meaning that the head of the new corporation holds power over all of it, assets, shares, etc.

    Any property (assets) owned by each corporation will go into the new existing corporation, combined.

    If there were any instances of trouble with the corporation that will no longer exist, the new corporation has to deal with these issues as if they were its own.

    There will still be shareholders and/or the board of directors, and the clerk.

    The Articles of Incorporation that was filed when the existing corporation was incorporated needs to be amended. This form was filed to choose the name of the company, its clerk, board of directors, and/or shareholders, what types of services the business would offer, and things like that. The main reason an Articles of Incorporation is filed is to make sure that the chosen business name is not like one that another company has.
     
  19. eddane

    eddane
    uix_expand uix_collapse
    Member

    Joined:
    Nov 16, 2009
    Messages:
    56
    Likes Received:
    0
    You need to consider what the goals of merging the two businesses are. Will it increase your earning potential?

    Ed
     

Share This Page