3 Benefits of a Small Business Being Acquired by a Larger One

3 Benefits of a Small Business Being Acquired by a Larger One

In 2022, the business world saw 18,072 mergers and acquisitions take place which made a substantial impact on all types of industries. More CEOs and small business owners are turning to mergers as a way to bolster their competitive edge, increase efficiency, and bolster their bottom lines.

While the large players have certainly embraced the numerous advantages of M&A deals, what’s in it for the smaller business? Well, the advantages can be significant and many. Let’s take a look at what may be the top 3 benefits of a small business being acquired by a larger one.

1. More Customers, New Markets

Being acquired by a larger company can bring “instant access” to all-new markets the small business may otherwise have needed years of effort and expenditures to acquire. It’s of enormous value to gain new customers who are already “qualified” because they are familiar with the product or service offered. Furthermore, this is an excellent way to expand geographically or even into new industries. That may include access to a brick-and-mortar site in a new location. In a similar regard, the small company can tap into its larger new partner’s proprietary digital landscape.

2. Cost Savings

One of the main achievements of many small business owners is finding ways to cut costs, run leaner, save on procurement, marketing, labor, healthcare — and a host of other aspects of running a profitable operation.

By merging with another company, redundancies can be eliminated and processes streamlined. A small company also gains access to the resources of the larger company. Overhead costs are now shared and there is likely to be reduced administrative expenses, not to mention a bolstered purchasing capability.

3. Acquiring New Talent

One of the biggest challenges for business models large and small these days is hiring. That means finding enough skilled workers for what they need, but also luring the most talented individuals to come on board and add their value to the team.

A small business can quickly gain access to highly educated, experienced, and deeply skilled personnel they may never have been able to attract or afford before.

Even More Benefits

The three categories discussed above are just a few of the benefits that a small company can gain as the result of a successful M&A. Let’s just take a quick look at a couple more “bonus advantages”:

  • Risk Diversification

This can be complex to explain fully but suffice it to say that by combining the investments of diverse asset classes within an overall portfolio, the result is often better long-term returns and reduced risk to individual holdings.

  • Tax Benefits

Another complicated area -– what’s more complicated than taxes? The bottom line is, however, that significant advantages may be gained on tax issues via M&A. One simple example is that some states are far more burdensome in how they treat local businesses. A merger that combined firms from two different states may spell an opportunity to choose the more advantageous tax regime. Moreover, beyond state-level considerations, strategic mergers can enable companies to optimize their tax structures, potentially benefiting from enhanced deductions, credits, or more favorable treatment of capital gains.