One of the many services we offer is helping your company with mergers and joint ventures. However, many business owners are not 100 percent certain as to what the difference is between the two. Let’s take a look and what they are.

Mergers

When two separate firms merge into one, they no longer exist as independent firms. Because small businesses have limited capital, merging with another company or working with another firm is sometimes a good idea. Mergers are useful when two businesses want to become fully integrated. That is, when two firms have enough overlap, they are more than capable of doing most of their business together.  The owners of the new company are the same as the owners of the original two companies. A merger, as opposed to a joint venture, involves a permanent commitment.

Joint Venture

Now, a joint venture on the other hand typically has a very limited scope. A joint venture focuses on a specific area where two firms still work together, but the majority of their business remains separate from each other. When a joint venture is created, it is owned by the original firms that created it. A nice example is when Microsoft and NBC Universal created MSNBC as a joint venture, which still had the two mother companies maintaining ownership of the brand new venture. A joint venture involves lower commitment levels from the two parties involved than in a merger. A joint venture is also good test to see how two firms work together.

Mergers and joint ventures can be confusing if you do not know the difference between the two, and they can be big playing cards for your business. If you have any questions about our services or about mergers and joint ventures give us a call at 856.794.8400.