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How do mergers and joint ventures compare?

There comes a time in which businesses may consider expanding their reach. They may do this after they feel that they’ve mastered their specialty and they’re looking to expand their product line or services. They may also do this after realizing that they’ve reached their full potential alone and could benefit from bringing in additional professionals.

No matter what your reason is for growing your business, you have a few options available. One option is pursuing a merger. The other is to initially give a joint venture a try. How do you choose between the two options?

What to know about joint ventures

You may be eager to grow your business, yet the prospect of jumping “all in” may seem daunting to you. If this describes you, then a joint venture may be best suited for your situation.

A joint venture allows you to team up with another party on a short-term basis. In this instance, you and your business partner would retain your independent businesses, only aligning your work on a specific, limited-scope project. As you might imagine, unraveling this business relationship should you two decide that you don’t want to continue working with one another will likely be only minimally disruptive to your business.

How mergers work

A merger involves two independent companies coming together permanently to form a new, single business entity. One of the biggest downsides to a merger is that you and your business partner decide to continue working together. Unraveling such a business arrangement can be quite involved and significantly disrupt your operations.

There are many other pros and cons associated with mergers and joint ventures that you’ll carefully want to weigh before pursuing either option for growing your business. Take time to carefully consider them. Seeking legal guidance is also helpful.