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Five ways to merge small businesses in Texas

Small businesses mergers in Texas are becoming more common business practices. Typically a company seeks a merger to gain access to new markets and to strengthen existing market position. Five common types of company mergers exist: product extension merger, vertical merger, market extension merger and conglomerate merger.

A product extension merger is conducted between two companies that manufacture related products. The main purpose of this kind of business merger is to gain access to a much larger customer base in order to increase profits substantially.

A vertical merger brings together two businesses that manufacture different parts of a specific product. This type of merger can occur between two or more firms which operate within the same industry but at varying levels. Business partners in this type of merger increase synergies for a more efficient operating system.

Another type of merger is called market extension merger where two companies that have similar products merge to gain access to a broader sales market which ultimately results in a larger client base and increased profitability.

A conglomerate merger is the complete opposite of market extension merger. In this merger, two businesses with completely different business activities combine into one company. Conglomerate mergers can be of two types - pure and mixed. In a pure conglomerate merger, firms with nothing in common combine to form a new entity. In a fixed conglomerate merger, firms seeking to extend their presence in sales markets and combine their production capabilities to increase product availability merge and form a new commercial entity.

Any Texas resident considering acquiring a new business or planning a business merger might find it prudent to consult with an expert in business legal matters. An astute business attorney may act as a guide through complex business transactions and offer insight into business acquisition from a legal perspective. The legal support received may prove invaluable.

Source: MBDA.gov, "5 Types of Company Mergers," accessed on April 3, 2015

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