Advanced technologies have taken the business world by storm and altered its dynamics for good. Whether we like it or not, this is far from the end of the story. A technological revolution is underway, changing every aspect of human life on this planet. Forget the good old days, when a man used to start a business and pass it on to the next generations to live happily ever after.
This is not to say that no risks were involved in the past, but competition has increased due to several factors, such as globalization, technology, and changing consumer behaviors and consumption patterns.
In today’s world, only the fittest survive. The fittest are those businesses that refuse to be laggards. They adapt to technologies, study the latest trends and change their strategies in order to stay relevant in the market.
One strategy that is becoming increasingly popular is pooling resources and talent to take on even bigger competition. In pure business terms, it is called a merger.
At a time when giants in different sectors have merged or are considering merging with other entities, small and medium enterprises should no longer think of it as an option but a necessity and a smart move that guarantees healthy dividends in the long term.
According to media reports, the Saudi market saw mergers and acquisitions jump 68 percent in the first nine months of 2021. And we must not forget the merger of National Commercial Bank and Samba Financial Group, which led to the creation of the regional heavyweight Saudi National Bank.
In the case of SMEs, a merger is the best option to combine resources and talent in order to add value to a new product or service, or to existing operations. By doing so, two or more entities decide to share liabilities and assets to minimize risks and ensure a sustainable business.
Globalization has led to the expansion of huge corporations in different parts of the world. Due to their huge pools of resources available to these multinationals, it is difficult for a local SME to compete. This further increases the need for SMEs to consider consolidations. In August 2021, Saudi Arabia’s General Authority for Competition approved the merger of 32 companies and local exchange institutions in what was described as one of the largest merger operations in terms of the number of establishments involved
in a single deal.
The merger will result in a closed joint-stock company to mitigate the impact of the coronavirus disease pandemic.
These are all recent examples of companies taking wise steps to confront the challenges posed by the pandemic and other factors that continue to reshape the business world.
However, it is necessary to consider factors such as potential savings and synergies. Another key issue is ensuring a smooth transition into a new management culture in the resultant entity by accommodating key features of both parties.
Every company has a different work culture, so if two entities are considering a merger, their respective top managements should work out a strategy to ensure the emerging entity’s working style contains qualities of both the organizations.
• Khaled Al-Mobid is the CEO of Menassat Reality Co., a Riyadh-based real estate developer.
Twitter: @khaledalmobid
