Joint ventures and mergers: What you need to know
Many businesses looking to expand their reach and revenue tend to look for outside resources that will make it easier to carry out their objectives. Joint ventures and mergers Business owners must understand what a joint venture is to see if it's best to help them meet their objectives.
How do joint ventures and mergers differ?
Two parties may create a separate company to work for while still retaining their pre-existing individual ones as part of the joint venture process. Mergers, however, involve two distinct companies coming together and forming a new one. There's generally a dissolution of each of the party's two prior companies once the merger occurs.
Why might parties opt for a joint venture instead of a merger?
One of the most common reasons why two companies may set up a joint venture before moving forward with a merger is to test out the waters to see how well they mesh on a limited basis before fully committing to work together full-time. Joint ventures are variable as far as how long that they last. They can either be temporary or permanent. Mergers, by comparison, are generally permanent. It may be quite a costly legal undertaking and disruptive to business for both parties to disaffiliate themselves after being united through a merger.
Deciding whether a joint venture or merger is right for you
You may want to take some additional time to understand the difference between a merger and a joint venture if you're considering going into business with another company. The two are entirely different from a legal perspective, and the implications for one can be much longer and more significant than the other.When considering any new business relationship, it may be helpful to discuss the matter with an experienced business attorney to ensure that both parties' rights, interests, and considerations are fully represented in the business venture moving forward. You'll want to iron out any disagreements or concerns before formalizing your contract with one another.