Mergers and Acquisitions ( Mergers & Acquisitions, M&As) are transactions that, along with the transfer of ownership, primarily imply a change in control over the enterprise (Corporate control) . Consequently, the acquisition of minor, incl. oriented exclusively to obtaining speculative income, shareholdings by individuals and / or institutional investors (portfolio investment) does not apply to them.

The concept of absorption ( Acquisition) covers the acquisition of the entire enterprise, its individual parts, as well as strategic participation in capital (direct investment). Confluence ( Mergers) in turn represents a special form of absorption in which the acquired company loses its legal independence. Acquisitions are often referred to as acquisitions ( takeover), which can be carried out with the support of the management of the target company ( Friendly takeover) or contrary to his expressed wishes ( Hostile takeover). In the case when, during a merger, both participating enterprises lose their legal independence and become part of a new company, one often speaks of consolidation.

In a broad sense, mergers and acquisitions also mean the creation of strategic alliances with other companies and the separation of assets ( Divestitures). Most often, strategic alliances are created on the basis of mutual participation in capital, or with the establishment of joint ventures ( joint ventures) at the expense of contributions to a common subsidiary. The most common form of asset separation is the sale of an existing subsidiary to another company. Sometimes a part of the enterprise is separated separately as an independent company (“spun off”) and the shares in it are proportionally distributed among the shareholders of the parent company ( Spin- Off). If in this case we are talking about the liquidation of the entire parent company, they talk about crushing ( Split- Up). It is also possible to legally spin off part of the enterprise by exchanging the shares of the parent company for the shares of the new company ( Split- Off). At the same time, the parent company can sell the shares of the spin-off company to a third party and thereby receive additional capital ( equityCarve-out).

The purchase of an enterprise is usually carried out by acquiring shares ( share Deal), which are offered either in exchange or over-the-counter trading. When buying legally non-independent shares, an alternative is the transfer of the relevant property items ( asset Deal). In contrast to the Share Deal, with an Asset Deal, there is a certain possibility to carry out a transaction without its approval by the general meeting of shareholders.

Currently, a significant number of major mergers and acquisitions are of an international nature and are therefore often carried out in accordance with international, mainly Anglo-Saxon customs. Let's consider the most important of them.

Organization of transactions

Mergers and acquisitions use various methods of company valuation, the contents of which are detailed in the relevant literature. But since often not all the information necessary and reliable for assessing the value of a company is available, valuation of a company is ultimately more of an art than a science (Garbage In - Garbage Out). In practice, several valuation methods are used in parallel and their results serve to determine the true value of the company.

In the Anglo-Saxon countries, Due Diligence has been a key element of the acquisition process for a long time, which allows potential buyers to conduct a qualitative analysis of the acquired company.

All those interested in buying during Due Diligence get access to a standardized set of data. In particular, within the framework of Due Diligence, as a rule, the following are provided:

general information about the company: registration statement, articles of association, information about managers, company structure, affiliated companies, etc.
information about the property status and obligations of the company: a list of all tangible and intangible assets, information on existing short-, medium- and long-term obligations (indicating debtors and creditors, interest rates, payment terms), mutual obligations within the company, etc.
financial statements: annual and quarterly balance sheets, income statement, audit report, etc.
existing agreements with the staff and trade unions within the framework of labor legislation, pensions, etc.
other contractual obligations and rights: contracts within the company, lease agreements, agreements with customers and suppliers, etc.
information about possible legal processes (civil, labor, tax, administrative, etc.)

Verification of the reliability of the information provided as part of Due Diligence, as well as the validity of the estimated purchase price, is often carried out by the buyer with the involvement of various consultants.

As a rule, auditors and lawyers involved in the acquisition of a company are engaged in optimizing the legal and tax aspects of the transaction. An important policy decision in this regard is the choice between Share Deal and Asset Deal. When acquiring shares, the tax environment of the acquired company is usually preserved and therefore there are fewer opportunities for optimization than the direct purchase of a part of the property. With an Asset Deal, it is possible, for example, to exclude certain property and liabilities from the transaction, thereby reducing tax payments.

One of the advantages of Share Deals is that the management of the target company can be excluded from direct influence on the execution and execution of the deal, and at the same time it is possible to avoid the influence of existing conflicts of interest between the owner and the management of the company. Thus, hostile takeovers occur, as a rule, in the form of a Share Deal, since they are directed directly against the interests of management. At the same time, there is a risk that the remaining minority shareholders may challenge the rights of the buyer, complicating the transaction.

In the United States, acquisitions (in particular hostile ones) are often financed by placing (selling) highly profitable valuable papers (Quasi- equity, junk Bonds), while the degree of indebtedness of the enterprise increases significantly. So, one of the well-known methods of financing - Leveraged Buy Out (LBO) forces the management to a radical program of company restructuring ( Restructuring) necessary to ensure the ability to meet obligations on high interest payments by increasing the profitability of the business, thereby preventing the company from possible bankruptcy. At the same time, the interests of employees, customers and suppliers are often taken into account to a lesser extent.

Mergers and acquisitions are currently one of the key aspects of the activities of investment companies and banks that provide advisory and other services in the field of corporate finance.

In addition, services for the organization of mergers and acquisitions are provided, along with investment banks, also by specialized departments of universal banks and consulting companies, as well as legal and specialized companies ( M& A- boutique). They usually represent the interests of one of the parties involved and provide support to the client at every stage of the process. In contrast, a number of companies (brokers) mediate between the parties involved and, as a rule, receive remuneration from each of the parties. Their efforts are concentrated mainly on establishing contacts and are limited in most cases to transactions of low value and of a local nature.

Due to legal restrictions on transactions using insider information, companies and banks are forced to separate consulting activities from their own and other market operations. As a result, M&A has developed a distinct corporate and industry culture.

Professional consultants have a detailed knowledge of national and international customs in the implementation of mergers and acquisitions, which allows them to organize and carry out the acquisition process more efficiently. As a rule, their activities include, along with strategic consulting (in particular, structuring the acquisition process, business valuation, collecting information about potential investors, negotiating, information support for clients), also the technical implementation of the transaction.

By engaging consultants, the parties involved seek to avoid unnecessary transaction delays, adverse contract conditions, potential liability risks, and post-contract integration issues that ultimately help maximize/minimize the sale/acquisition price. In addition, the acquiree often engages consultants to implement safeguards ( Anti Raid), or to check the reasonableness of the proposed price.

Specialized M&A firms tend to be successful in the market through a certain industry or regional specialization, as well as through medium-sized transactions. In turn, specialized departments of universal commercial banks often provide such services to corporate clients as one of the elements of comprehensive services.

The consultants act as a partner of the company's management, providing them with support in managing the process of acquiring/selling a business, using their expert knowledge of the technical execution of the transaction and the specifics of the industry.

The quality of the consultant is determined by his ability to determine the best conditions for the implementation of the transaction. The so-called Closing competence is also essential, i.e. the ability at a decisive moment to push the client to the actual transaction. The successful execution of an M&A requires, in addition to strategic competence and technical knowledge of the details of the process, also the ability to involve various specialists (lawyers, auditors, etc.) to optimize the legal and tax aspects of the transaction.

The selection of a consultant is carried out through careful selection ( Beauty Contest). All applicants, as a rule, receive a standardized information package about the planned transaction with an offer to present (present) the company for participation in the competition. The assessment of the attractiveness of a particular company as a consultant in a planned transaction is carried out on the basis of a discussion of the following aspects:

Project plan: a step-by-step description of the transaction with the timing of each stage, the participation (involvement) of the company's employees and the presence of the project team on site.
Transaction partner: selection of possible applicants for the implementation of the transaction, possible motives for the acquisition and, accordingly, sale, registration of the process.
WITH project team specifics: the composition and availability of the necessary experience among employees (knowledge of the industry, the ability to perform tasks), recommendations ( track record), the possibility of attracting additional experts (lawyers, management experts, etc.).
The amount of the fee .

The execution of the contract for the provision of consulting services is carried out after the company has been given the appropriate order ( Engagement Letter) to participate in the transaction.

The consultant's remuneration usually consists of a fee, the amount of which depends on the success of the transaction ("success fee"). So, for example, by the acquired companies, it is set as a certain percentage of the income from the sale. In the event that the transaction has a relatively small value, as a rule, the minimum amount of the fee for its successful implementation is stipulated ( Minimum success Fee). Acquisition companies often provide financial incentives when hiring consultants to pay a lower purchase price, such as a percentage refund of the difference between the maximum expected price paid and the price actually paid. It should be noted that previously the Lehman scale ( Lehman), establishing the 5-4-3-2-1 rule. Thus, the amount of remuneration is 5% for the first million, 4% for the second million, 3% for the third million, 2% for the fourth million and 1% for the rest of the purchase price. Currently, this rule is at least used as a starting point in fee negotiations. At the same time, the fee for large transactions in emerging markets ( Emerging markets) is often accompanied by higher rewards, while smaller trades in established markets may be valued lower.

Along with the size of the transaction, the size of the fee is also influenced by a number of other factors, such as the complexity of the transaction, the expected duration of the merger, the reputation of the consultant and the overall profitability of the project.

In addition to the fee, the amount of the advance payment is negotiated ( Retainer Fee), which is counted as successful completion transactions on account of the fee, as well as additional expenses (travel expenses, information support costs, etc.) are reimbursed. In some cases, the amount of compensation (commission) is stipulated in the event of (early) refusal to complete the project by the client or the opposite party (usually hourly compensation).

Creating value

The growth of the company's value to a large extent presupposes the presence of a value-oriented management of the corporate investment portfolio, incl. when acquiring and selling, both from tangible and intangible assets. In this regard, mergers and acquisitions are not in themselves the ultimate goal of transformation, they are always only a means to an end.

The assessment of a proposed M&A begins with a detailed analysis of the competitive environment. It is produced either by our own project team or with the assistance of a consultant.

At the same time, the increase in the value of the company, as well as potential threats to reduce it, are both on the active and passive side of the company's balance sheet.

In the asset balance of the enterprise, the following points and factors are of the greatest importance, in particular:

The geographic and product-related size of markets (which determines, among other things, the possibility of the emergence or availability of substitute products and the degree of substitutability, i.e. price and cross elasticity of demand);
Maturity of the product range and customer preferences;
Potentials for expansion of productivity and product mix by competitors (short-term and long-term price elasticity of supply), as well as other strong and weak sides competitors;
Existence of entry barriers in the relevant market;
Competitive and supply conditions in factor markets, as well as costs associated with barriers to exit the market;
Legislative and other (including political) restrictions on the market activities of the enterprise (competitive policy, administrative interference, etc.).

On the passive side of the balance sheet of the enterprise, it is necessary to take into account, in particular, the following factors:

The impact of capital costs and the possibility of changing the structure of capital;
The profitability of the company and the risk of its bankruptcy;
Future tax liabilities;
Advantages and disadvantages of the methods of financing used;
Access to financial markets.

Acquisitions in general can be based on both economic and financial motives. Financial benefits can indirectly help reduce capital costs, increase future Net-Cash Flows, and increase company value. Among the economic incentives, the main one is the synergy effect, as well as a number of other potential opportunities, including:

Achieving economies of scale and, accordingly, reducing fixed costs (Economies of Scale);
Reducing costs by expanding the range of products (Economies of Scope) or integrating production activities along the value chain (Economies of Vertical Integration).
Advantages of specialization and cost reduction effects in the operational or administrative sphere;
Obtaining new sales channels for products and providing access to untapped (new) markets and technologies;
Increasing control over the market, increasing market share - taking into account possible negative political and legislative consequences that limit the exercise of market power (for example, restrictions on competition);
Increasing market entry barriers for potential competitors by creating excess capacity, additional product differentiation, etc.;
Improving the quality of management in the acquired (target) enterprise.

It should be noted that the economic benefits of an acquisition are often combined with performance losses due to the difficulty of integrating different corporate cultures. In addition, with the complication of the combined structure, there is an increase in the administrative apparatus, bureaucratization and a decrease in the business activity of individual units.

The main prerequisite for the implementation of mergers and acquisitions is ultimately a different valuation of the object by the buyer and the seller. Sometimes this is due solely to an erroneous assessment. In the longer term, the feasibility of the transaction is related to the assumption that the buyer can better realize the economic and financial growth potentials of the company's value. At the same time, various empirical studies show that the shareholders of acquired enterprises, as a rule, have more benefits from the transaction, while the buyer in the long run often cannot significantly improve its profitability. This can be explained, for example, by the fact that the seller is often able to appropriate possible value gains in price negotiations.

The buyer and the acquiree may operate in the same market ( horizontal merger), at different stages of value creation ( vertical) or in unrelated markets ( conglomerate e). Directly economic advantages prevail in horizontal and vertical mergers, while in conglomerate transactions they are often justified by financial advantages. International transactions (foreign direct investment) are characterized by relatively higher current costs ( Managing ata Distance) and often lead to increased competition, restructuring of enterprises located on the local market.

The growth potentials of a company's value can be associated either with organic development through investments (internal growth) or through acquisitions (external growth). The attractiveness of the acquisition increases with the complexity of the company's competitive advantages ( Competitive advantage).

Acquisitions often require a shorter period of time to develop new products and therefore enter new markets, and are often associated with lower business risk. However, as already noted, integration problems can lead to smaller increases in value compared to organic growth in the medium and long term.

The Mergers and Acquisitions Process from a Seller's Perspective

Consider some of the most milestones mergers and acquisitions transactions.

The seller is interested in maximizing the proceeds from the sale of the business and therefore has an incentive to set future Cash Flows too high. In this regard, the role of the consultant in the preparation of the transaction is to verify the reliability (Due Diligence) of various company data (balance sheet, income statement, planned Cash Flow) and bring them in line with reality. In addition, the consultant is engaged in ensuring the availability of information about the offer to sell the business to third parties. It is important that the information provided about the company being sold does not contradict other information about the company's market position and strategy. The consultant then determines the value of the company, which is taken into account by the client when calculating the potential synergy (Synergy) and serves as the basis for future negotiations on the total cost of the transaction.

In practice, the consultant draws up an agreement with the client in such a way that the risk of liability for errors or unsatisfactory results in the preparation of the transaction in many cases is transferred to the seller. This, of course, contributes to improving the quality of information provided by the client.

The consultant then develops, in collaboration with the client, an information memorandum (in industry jargon, Equity Story), which contains key balance sheet items and a description of the company's market position, its strategic advantages, as well as possible directions for potential buyers to develop the business. The central quality criteria are the reliability, completeness and persuasiveness of information, incl. presentation of possible scenarios for the development of the company.

The goal of the client is to identify and notify the group of potential buyers as fully as possible. Therefore, when identifying potential buyers interested in a purchase, the consultant uses a wide range of professional sources of information, including various databases, trade publications, exhibitions, reference agencies and the Internet.

The consultant prepares an initial list of potential buyers (the so-called Long List), incl. their profile is compiled, financial opportunities for investing capital, strategic compatibility are assessed, and other important criteria are taken into account for each specific transaction, depending on the volume of this list of companies. Then, together with the client, they are classified into groups using certain selected criteria, the most attractive companies are entered in a separate list (Short List). At the same time, it is advisable to focus on the potential for realizing synergy, since this will contribute to achieving a higher sale price of the business in subsequent negotiations.

Selected potential buyers are sent an offer with anonymized key data of the company being sold (so-called short profile) to determine their possible interest in acquiring the company.

If the answer is positive, the companies interested in buying receive an information memorandum. Previously, they sign a Confidentiality Agreement, which stipulates the obligation of the parties not to disclose information received as part of the negotiation process. So, for example, it is stipulated that in the event of an early termination of negotiations, it is necessary to return or destroy all received documents.

After receiving the information memorandum, potential buyers are offered to submit their proposals (without obligations) for the transaction within a certain period of time, on the basis of which the seller preliminarily determines the most attractive candidates. At the same time, the seller must ensure that competition between potential buyers and, accordingly, the proposed purchase price of the company does not decrease.

At the next stage, potential buyers get the opportunity to study the company in more detail (Due Diligence), incl. an inspection of the enterprise is carried out, a meeting with the management is organized, and they are also provided with a room (Data Room) with access to actual (legal, financial and other) information about the enterprise.

The scope and quality of information provided by the seller on this stage, of course, is essential, since sheltering them important information, as a rule, is perceived negatively and reduces the interest of buyers in the transaction. On the other hand, high transparency can lead to the availability of important information to competitors.

After due diligence is completed, potential buyers refine and resubmit their proposals for the deal, which serve as the initial basis for further negotiations. As a rule, a closed auction (Sealed Bid Auction) is organized, while the received applications are not publicly disclosed, the number of buyers and the degree of competition between them at the end of the auction is also not announced by the seller. The seller reports the highest offer, then a new auction is held. As a rule, this form of trading helps to improve the buyers' previous offer, corresponding to the seller's idea of the level (or higher) of the minimum transaction price.

As a result of the auction, the seller chooses the best offer and undertakes to suspend negotiations with other buyers. In addition, it is possible that a potential buyer establishes an attractive offer of the offer already during the auction (Preferred Bidder). If from the very beginning the possibility of competition with other buyers for a better offer (Preemptive Bid) is excluded, the seller directly proceeds to the final stage of the transaction.

A potential seller at the final stage of the transaction, as a rule, instructs his auditors and lawyers to conduct further Due Diligence in order to double-check the information received earlier, which constitutes the basis for the final contract of sale. At the same time, relevant information is analyzed in comparison with the data of the first Due Diligence, and a description of the financial and economic situation of the acquired enterprise is given. A potential buyer during this period retains free access to all intra-company information.

Both contracting parties discuss in this phase all relevant details of the transaction.

The final price may differ significantly from that stipulated in the preliminary contract if the repeated Due Diligence reveals new significant data about the object of sale.

Completion of the transaction (Closing M&A Deals) is associated with the payment of the agreed price. At the same time, the contracting parties may sign a number of additional agreements at the conclusion of the contract, which, for example, provide for the restriction of competition between companies, in particular, it is prohibited for the seller to carry out activities in the same industry for a certain period of time or it is not allowed to poach employees this enterprise. At the same time, buyers seek to exclude the leakage of important information to competitors.

In conclusion, it should be noted that the distribution of risks in mergers and acquisitions can be adjusted by including various obligations in the contract, incl. provision of guarantees in favor of the buyer. As a result, the end result of the transaction may significantly worsen the position of the seller and in this regard, a distinction is made between the sale price specified in the contract and de facto paid by the buyer.

Levels that result in larger companies entering the market to replace a few smaller ones.

merger- this is the union of two or more economic entities, as a result of which a new, united economic unit is formed.

Absorption- this is a transaction made in order to establish control over a business company and carried out by acquiring more than 30% of the authorized capital (shares, shares, etc.) of the company being acquired, while maintaining the legal independence of the company.

Classification of the main types of mergers and acquisitions of companies

Depending on the nature of the integration of companies, the following types are distinguished:

Horizontal merger of the firm. This is nothing more than a combination of two companies offering the same product. The benefits are visible to the naked eye: opportunities for development are increasing, competition is waning, etc.
A vertical merger is a combination of a number of companies, one of which is a supplier of raw materials to another. Then the cost of production is rapidly reduced, and there is a rapid increase in profits.
Generic (parallel) mergers - the union of companies that produce related goods. For example, a camera company merged with a film company.
Conglomerate (circular) mergers - an association of companies that are not interconnected by any production or marketing relations, that is, a merger of this type - a merger of a firm in one industry with a firm in another industry that is neither a supplier, nor a consumer, nor a competitor.
Reorganization is the merger of companies involved in different business areas.

According to analytical estimates, about fifteen thousand M&A transactions are concluded annually in the world. The United States occupies the leading place in terms of amounts and volumes of transactions. Obvious reasons: today the US economy is experiencing perhaps the most favorable period (for this moment the situation worsens due to the economic crisis). All free money literate people invest in business. It is logical that investors seek to maintain and stabilize direct control over the use of their finances. The best option for this is direct participation in the management of the company. Therefore, the combination of companies is one of the investor's opportunities to manage his capital personally.

Transactions can be divided geographically into:

local
regional
national
international
transnational (with participation in transactions of transnational corporations).

Depending on the attitude of the management personnel of companies to a merger or acquisition of a company, the following can be distinguished:

friendly
hostile

By nationality, we can distinguish:

internal transactions (that is, occurring within the same state)
export (transfer of control rights by foreign market participants)
import (acquisition of control rights over a company abroad)
mixed (with participation in the transaction of transnational corporations or companies with assets in several different states).

Transaction motives

Since the late 1980s, the “pride theory” has become widely known. hubris theory) Richard Roll, according to which takeovers of companies are often explained by the actions of buyers convinced that all their actions are correct and foresight is impeccable. As a result, they pay too high a price for achieving their goals.

The theory of agency costs focuses on the conflict of interests of owners and managers, which exists, of course, not only in mergers and acquisitions. The presence of their own interests can give rise to management special motives for mergers and acquisitions that are contrary to the interests of the owners and are not related to economic feasibility.

The following main motives for mergers and acquisitions of companies can be distinguished:

Acquisition can be used by a large company in order to complement its range of products offered, as a more efficient alternative than building a new business.

Impact on the economy

A number of economists argue that mergers and acquisitions are commonplace in a market economy and that ownership rotation is necessary to maintain efficiency and prevent stagnation. Another part of managers believe that mergers and acquisitions "kill" fair competition and do not lead to the development of the national economy, as they destroy stability and confidence in the future, diverting resources to protection. There are conflicting opinions about this:

Lee Iacocca denounces mergers and acquisitions in his book The Career of a Manager, but calmly looks at the creation of super-groups as an alternative to M&A
Yuri Borisov in the book "Games in" Russian M&A "" described the history of the redistribution of property in Russia and the creation of private monster companies after privatization through mergers, acquisitions and power raiding, as a natural process [the significance of the fact?] .
Yuri Ignatishin in his book "Mergers and Acquisitions: Strategy, Tactics, Finance" considers M&A transactions as one of the tools of a company's development strategy, which, if used correctly and well-developed, can give a synergistic effect [the significance of the fact?] .

Major Mergers and Acquisitions

Deals in the 1990s

Place	Year	Acquirer	Acquired
1	1999	Vodafone Airtouch	Mannesmann	183.0
2	1999	Pfizer	Warner Lambert	90.0
3	1998	Exxon	Mobile	77.2
4	1999	Citicorp	Travelers Group	73.0
5	1999	SBC Communications	Ameritech Corporation	63.0
6	1999	Vodafone Group	AirTouch Communications	60.0
7	1998	Bell Atlantic	GTE	53.4
8	1998		Amoco	53.0
9	1999	Qwest Communications	US WEST	48.0
10	1997	worldcom	MCI Communications	42.0

Transactions since 2000

Place	Year	Acquirer	Acquired	Transaction value, billion $
1	2000	Merger: America Online Inc. (AOL)	Time Warner	164.747
2	2000	Glaxo Wellcome	SmithKline Beecham	75.961
3	2004	Royal Dutch Petroleum Co.	Shell Transport & Trading Co.	74.559
4	2006	AT&T Inc.	Bell South Corporation	72.671
5	2001	Comcast Corporation	AT&T Broadband & Internet Svcs	72.041
6	2004	Sanofi-Synthelabo S.A.	Aventis SA	60.243
7	2000	Branch: Nortel Networks Corporation		59.974
8	2002	Pfizer	Pharmacia Corporation	59.515
9	2004	JP Morgan Chase & Co	Bank One Corp	58.761

Transactions in 2009

Pfizer acquired Wyeth for $64.5
Merck acquires Schering-Plough for $46
MTN acquired Bharti for $23

The largest deal involving a Russian company is the merger between VimpelCom and Kyivstar (the latter is valued at about $6 billion). Other major deals this year are the completion of a deal to acquire control in RussNeft (estimated $3.1bn) and the acquisition of a minority stake in NOVATEK (estimated $2bn).

Pfizer and Merck deals topped $100 billion as the drug market was the least affected by the financial crisis and managed to keep cash flows stable.

Notes

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See what "Mergers and Acquisitions" is in other dictionaries:

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In the distant 90s of the last century, there was a change in the course of many companies. The concepts of flexibility and agility receded into the background, and instead of these well-established principles, new ones came: expansion and growth. Absolutely all large companies sought to find an additional source of expansion of their activities. It was during this critical period that the concept of "acquisition and merger of companies" appeared.

To date, the merger of companies is the leading method of successful development own business. Almost all successful companies use it today. And how exactly this process takes place, we will consider below.

What do mergers and acquisitions mean?

Quite often, the concept of "merger" is confused with the concept of "acquisition". In fact, these are completely different concepts, as well as their true meaning. This happens for the reason that a sufficiently large number of corporations do not always voice their true intentions in relation to the object of interest to them.

Absorption

This concept refers to the takeover by a large company of a smaller company. When this process occurs, the small organization that was absorbed by the business shark ceases to exist legally. After this process, it becomes an integral part of one large corporation. But at the same time, the functions of such an organization are preserved. In other words, the field of activity does not change, only the name can be changed.

To date, there are some of the most striking examples of absorption. Financing of mergers and acquisitions is carried out by the participants or the state when it is interested in it. The well-known Google at one time absorbed several smaller companies such as Begun, AOL, YouTube. It is worth noting that this is only a small part of the companies that became the property of Google, but as a good example, this is more than enough.

But, as described above, quite often corporate sharks do not want to visually demonstrate the absorption of small firms and can create the so-called appearance of an equal merger. In this case, a merge occurs.

Merger of firms

This concept refers to the general association of companies with equal rights for each. And in this case, it does not matter how large and equivalent in terms of turnover the firms that have joined together for joint work. It is worth noting that real association in practice occurs in very rare cases.

Features of Mergers and Acquisitions

Mergers and acquisitions of companies have their own characteristics, which differ from each other.

In a merger, there is always one dominant company that initiates the process. Such a corporation has a large capital and the necessary capacities. At the same time, if smaller organizations that have decided to merge have shareholders, then they enter the new composition, retaining their shares and rights. In this case, only the name of their company changes for them, and the amount of dividends received remains at the same level.

In a takeover, a corporation that conquers smaller organizations acts as follows. The absorber redeems all the shares of the company from the shareholders who created this enterprise. In other words, people who owned the main share of the capital in the acquired organization, after the sale of their shares, lose all rights after the end of the acquisition procedure.

Reasons for takeovers and mergers

The point of acquisition and merger is to get maximum amount all the benefits of mutual cooperation. In an example, it looks like this. Two organizations combine their efforts and create one, while they optimize personnel, reduce the number of employees, due to this first step, there is a tangible saving of material resources.

The next step is to increase productivity. In other words, when there is a merger and acquisition of enterprises, then at the same cost, the output is two or even three times greater. As a result, the benefits of mutual cooperation are obvious.

The expansion of the market is another huge benefit for both companies, as the so-called coverage area increases by an order of magnitude. And the last advantage from joint cooperation is the improvement of credit conditions that the owners of the combined organization can receive.

It is worth noting that there is a practice of acquiring a company only at the expense of its wide client base. Always, at any time and under any market conditions, the most valuable asset of a manufacturing and marketing company is its customer base. And the thing is that, no matter how good products an enterprise produces, without a sales market, it is a worthless company in terms of turnover.

Therefore, almost always the real reason why acquisitions and mergers are carried out is the struggle for the market and the possible chance of eliminating a competitor.

But at the same time, it is not always possible to get only bonuses from the merger. Quite often, conflicts occur in new companies, which leads to the collapse and destruction common idea. Therefore, most often before the merger of companies, the parties sign a so-called memorandum.

The financial side of the merger of companies

As a rule, the combination of companies occurs in two ways, namely:

purchase of capital;
buyback of shares.

When buying capital, the following happens. One company receives for material assets the full right to own another company. If the buyer purchased only part of the assets from the seller, in such a transaction, the part that the buyer does not own is immediately allocated. This is how takeovers and mergers occur, and it becomes necessary to determine the management measure in relation to the seller.

At this method partial acquisition of the company there is another side of the coin. In most cases, even if the purchase of an enterprise has taken place only partially, it is not always possible for shareholders to influence the further course of the company's development. This is due to the fact that such conditions can initially be prescribed for a partial purchase of an organization. And as a rule, ownership of shares does not yet imply the ability to change or make any decisions. The only thing that stocks do is receive dividends.

What does the term "vertical and horizontal type of fusion" mean?

The term "vertical" is used to describe a specific process that occurs when companies merge. In other words, the company that initiated the takeover and merger can build a complete production chain through this procedure. Such a chain will include absolutely the entire technological and commercial process. From the receipt of raw materials, production of products to its sale to the end consumer.

Metallurgical, mining and engineering organizations can serve as a good example.

The term "horizontal" is used when merging enterprises that have a similar field of activity. In other words, the complete coincidence of the entire cycle of work.

What are the ways and formats of the process

Mergers and acquisitions of companies always take place in two main directions, namely:

Corporation. This type of merger is characterized by the unification of absolutely all active organizations that were involved in this transaction for synchronous work and obtaining common mutual benefits.
corporate alliances. Such a merger or acquisition occurs with one goal and under one condition: the activities of absolutely all participants must be deployed within one specific direction in the business. If there are other, production areas, then the dominant firm is engaged in their development independently. At the same time, this type of business is always separated into a separate structure, which is not related to the corporate alliance, more precisely, to the main activity.

Merge Format

The market for mergers and acquisitions is wide. According to the classics, the merge format is 50*50. But in fact, the experience of many organizations indicates that it is almost impossible to achieve such a merger model. The format refers to the ownership of the merge. Because it can be both national and transnational.

National Merger. A group of companies located in the same country decides on joint cooperation.
transnational merger. The corporation decides and makes an offer to another, smaller organization for a merger or acquisition. At the same time, a smaller enterprise is located on the territory of another country.

At the same time, there may be several enterprises in which a large corporation is interested, and they may be located in different countries.

The brightest examples

Acquisitions and mergers with impressive bottom line results are not uncommon. More about them. The idea of the acquisition is to increase its competitiveness in the sales market. But for the sake of truth, it is worth emphasizing that world practice is full of cases of complete failure after a perfect merger. Such incidents happened not only with ordinary enterprises, but also with fairly large market players.

If we consider the largest and most successful acquisitions, then we can cite the AT&T division acquired by Comcast Corporation as an example. Such a move helped this corporation become the leader in the cable television market in the United States. It is worth noting that the steps that needed to be taken to conquer the market Olympus cost this corporation a very large amount. But the acquisition strategy, despite the high costs, gave a dizzying result.

In this case, the well-thought-out actions of the corporation immediately led to three big pluses, namely:

the main competitor was neutralized;
the quality of the service provided has increased;
the coverage area of the cable network has expanded.

It was wise decisions and the ability to work as a team that could give such a tangible result in the end.

Sometimes international mergers and acquisitions fail. A good example of this is AOL. This corporation has merged with another corporation - Time Warner Cable. The cost of such a transaction was fabulous, but at the same time it did not bring the expected result. At the very beginning, such a deal promised great prospects for the future, but as a result, both companies lost their positions as leaders in a specific market.

The main problem turned out to be quite banal and unforgivable in the case of these leaders. The AOL corporation has designated such a failure as a too expensive merger procedure.

This is just a small assessment of mergers and acquisitions that have had a positive or negative result. It is important to understand that such transactions are quite expensive procedures, and it is not a fact that after the operation there will be long-awaited dividends.

How Mergers and Acquisitions Happen in Russia

In our country, and in the CIS countries as well, processes such as mergers and takeovers take place in a slightly different form. It should be noted that the Western market is noticeably the leader in this area. The problem is that all the processes of merging Russian companies have a political connotation. But at the same time, the most common form in which mergers and acquisitions take place in Russia is the integral one.

This form has become widespread partly because of the crisis. Vertical associations solve the most important problem, such as accounts receivable. An important aspect is the fact that with the help of such transactions it is possible to solve production problems. Unfortunately, most of these transactions take place only within the interests of the authorities.

Features of a merger in Russia: what such transactions look like

The peak of such transactions occurred in 2003. At that time, the total combined level reached $23 billion. But just a year later, such activity has fallen sharply.

In our country, the strategy of mergers and acquisitions, as a rule, is as follows: in most cases, the main player is always the government. This is due to the fact that the greatest interest is caused by enterprises that operate in the oil and gas industry. And if we are talking about a foreign enterprise, then in most cases such corporations are only interested in gas and oil. And only a few of the foreign investors are interested in the agricultural and food sectors.

As for the question of how such mergers and acquisitions look like in our homeland, let's say this. An example of such transactions is as follows. You should also understand how mergers and acquisitions are financed.

LLC "UMMC-Holding" is a company that was able to lead to the merger of over ten processing enterprises that are engaged in the ferrous and non-ferrous industries. To date, the direct influence of the UMMC extends to 22 organizations located in seven cities of our country. Moreover, UMMC also took over the operating Litaskabelis plant, which is located in Lithuania.

The main goal that was pursued in all these transactions was to increase the share of the enterprise in a specific market. Thanks to the integration, the domestic corporation not only created additional capacities and was able to reduce all investment risks by an order of magnitude. UMMC turned out to be a strong and firmly standing monster for only one reason: the corporation merged only those enterprises whose work was tested by the real market.

Conclusion

The modern economy is precisely the engine through which the mergers and acquisitions of enterprises are put into operation. These processes have a high chance and prospect in the future. But at the same time, such forms of business also have certain risks associated with high hopes and investments. The world history of the economy has a large number of unsuccessful transactions that brought the largest corporations to bankruptcy. But as they say, he who does not take risks does not drink champagne, and this proverb accurately reflects everything that happens in the M&A market.

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MAIN PART

CHAPTER 1. THEORETICAL

1.1 Absorption and merger - concepts and terms

1.2 Types of takeovers and mergers

1.4 Methods for assessing the value of a company during takeovers and mergers

CHAPTER 2. PRACTICAL

2.1 International Mergers and Acquisitions (M&A)

2.2 Market valuation of the two companies Glaxo Wellcome and SmithKline Beecham before the merger

2.3 Market valuation of the two companies Glaxo Wellcome and SmithKline Beecham after the merger into Glaxo SmithKline.

LIST OF USED LITERATURE

APPS

INTRODUCTION

The current active development of market relations in all industrial and financial sectors of the Russian economy primarily requires the introduction and further development of new organizational and management structures, as well as the development of methods and effective forms of combining the activities of financial companies. Mergers and acquisitions of companies at a certain stage of their evolutionary development is a common component of any economic activity. These actions are of particular importance for the entire international economy in the context of the economies of various countries and significantly affect the development of individual industries and industries.

Careful analysis and impartial observation of the merger of two international companies, especially if this process was successful and a positive overall financial result was achieved, can hardly be overestimated in terms of accumulating positive experience for similar Russian companies, especially in our difficult time, when Russian Federation there is an economic embargo on the part of the United States, as well as the EU countries in response to the consistent and principled policy of the Russian leadership regarding humanitarian support for the peoples of the former Donetsk and Luhansk regions of Ukraine, who have risen to fight against the pro-American anti-people and inherently criminal policy of the current Kiev authorities, which until to this day, despite the Minsk agreements, it continues ethnic cleansing of the civilian population of Eastern Ukraine and ruthlessly destroys its own people for the sake of its overseas masters. Although in fairness it should be noted that the economic sanctions applied by the West against Russia achieve rather the opposite effect, since at this very time our country is consistently strengthening the domestic national economic complex and improving the quality of domestic goods, while many manufacturing firms of the EU countries ( Germany, Italy, the Baltic States, Poland) suffer multimillion-dollar losses due to a sharp decrease in trade turnover with the Russian Federation.

In pursuit of the goal of further expanding its financial activities, an enterprise can use two ways:

Firstly, this is the internal growth of the enterprise, which is characterized by a slow certain pace, but is limited by the financial capabilities of the enterprise and the existing infrastructure;

Secondly, the economic effect can be achieved through the merger and acquisition of two or more enterprises of a similar kind of activity, while the merger is characterized by a fast process, but also by very uncertain end results, since companies can reorganize not only in their industry, but also in other related ones. business areas.

Of course, the method of mergers and acquisitions cannot be considered the only means of improving management methods. If the reorganization as a result of the merger of firms will improve the quality of management, then this will be a weighty argument in favor of such a reorganization. However, there is always a certain risk that the ability to manage a more complex organization will be overestimated, and the managers of the newly formed organization will have to deal with unfamiliar and new technologies and markets.

However, in some economic situations, dramatic changes are the easiest and most effective way improving the quality of management, since the managers of an inefficient company will not be able to make a difficult decision to dismiss themselves for their own inefficient actions, and the shareholders of large corporations will not be able to significantly influence the decision of who and how exactly will manage the corporation. Therefore, the further development of the infrastructure of the enterprise requires a significant scientific and practical justification. A weighty argument in favor of the importance of the merger can be a previous assessment of the coordinated work and functioning of the combined structure, which can be presented by independent experts.

The object of this course work is to review and carefully analyze all the processes of corporate mergers and acquisitions in today's global economic environment.

The subject of the proposed development is cross-border mergers and acquisitions strategies, which have a certain relevance for similar processes taking place in the Russian market economy.

The purpose of this course work is to study the features of mergers and acquisitions in international business on the example of the merger of the pharmaceutical companies Glaxo Wellcome and SmithKline Beecham.

The goal outlined above predetermines the fulfillment of the following tasks in this work:

Define what a "merger" and "acquisition" are;

Classify the concepts of mergers and acquisitions;

Describe the historical aspects of mergers and acquisitions;

Describe the types of mergers and acquisitions;

Reveal the motives for mergers and acquisitions;

Briefly describe mergers and acquisitions in international business;

Determine methods for estimating the value of a company during takeovers and mergers;

Lead existing methods protection against takeovers and mergers;

Give the market valuation of the two companies before the merger and the market valuation of the new company after the merger;

In conclusion, evaluate the effectiveness of the methods used in the merger of Glaxo Wellcome and SmithKline Beecham;

Mark the choice there. best method valuation of the new company in this merger.

CHAPTER 1. THEORETICAL

1.1 Absorption and merger - concepts and terms

The merger of companies (“business combination”, which means “business combination” in English) is the process of combining separate organizations (or companies), which can be represented as legal entities, into one economic structure (this can be an enterprise or group of enterprises) as a result of the process of accession (or merger) of one company with another (or with another), or when one company receives (acquires) control over the net assets and control over the activities of another company, or as a result of the so-called. "combining interests".

Therefore, the business combination process can be divided into three categories:

Legal merger;

Acquisitions (including reverse acquisitions);

Associations of interests.

A legal merger is a combination of two companies in which the following occurs:

One company transfers all its assets and liabilities to another, after which this company ceases to operate as entity(that is, the absorption process takes place here);

Or, both companies transfer all their assets and liabilities to the new company, after which both parent companies cease to operate as legal entities (i.e., there is a merger).

It is well known that in English language the word "merger" can be interpreted in two senses: it is the term "acquisition", it is also the term "merger, unification".

Of course, these words are close in their meanings, but, nevertheless, they are by no means synonyms and have somewhat different meanings in their meaning.

Acquisition - this is a combination of two companies or enterprises in which the enterprise that is the buyer receives or acquires control of the net assets, and also controls the activities of another enterprise that is being bought or will be acquired, in exchange for another enterprise transfers to the buyer the right to transfer assets, assume obligations, issue or transfer its shares. In this case, the purchase of a controlling or full block of shares is carried out, which are exchanged for assets or own shares of the buyer, or simply transferred to debt. Upon completion of this process, both of the above enterprises retain their functions as legal entities, however, a special relationship arises between them, which are interpreted as “mother and daughter”.

A reverse acquisition is an acquisition in which the selling entity acquires ownership (purchases) of the shares of another entity in an exchange transaction that involves issuing a sufficient number of voting shares and transferring them as consideration or for the purchase of shares. those owners or shareholders of the enterprise where these shares were located. The “buyback” process in which this consideration is obtained also means that the combined entity is under common control. More precisely, it is rather participation in exercising control over the acquiring enterprise, since its "old" shareholders still continue to be the custodians of their shares, while the acquiring enterprise continues to control the second enterprise, whose shares it bought in exchange for the opportunity to issuance of its own shares.

Pooling of interests is a type of legal merger or acquisition of companies, during which all assets, the value of which does not undergo revaluation, and liabilities are subject to the process of summing up, and the company, which acts as a legal entity, issues new shares in the amount of capital of the company that ceased to exist as a result of this process. At the same time, it is obligatory to exchange a certain part of the ordinary shares of the company that absorbs another company for the entire block of shares of the company that is subject to absorption, with the subsequent redemption of these shares.

Here, a strict rule must be observed that before the start of the acquisition process, both interested firms must have autonomy, that is, they must not be in a “family relationship” such as “mother and daughter”, while it is not at all necessary that at that time these firms were in size approximately equal.

This "pooling of interest" method originated in the United States as a counterbalance to the conventional method of buying a company, and as a result of the exchange of shares under this method, the shareholders of both companies involved retain their financial interests.

This is achieved in the following way. An acquiring company must issue voting ordinary shares to be subsequently exchanged for a substantial portion (but not less than 90%) of the voting ordinary shares of the acquiring company. In the future, the so-called. The "issuer" is acquired both for cash and may be borrowed, but not more than 10% of the voting common stock of the company that is being acquired, to then redeem all of their 100% as a result of the takeover of this company. Such financial expenses are intended to compensate disgruntled shareholders of the merging company, while retaining the possibility of share buybacks and bonus payments to shareholders.

Types of Mergers and Acquisitions - see Appendix 1

1.2 Types of takeovers and mergers

Depending on the nature of the association, there are:

horizontal merging. Companies that work in the same industry that produce similar products or carry out similar production processes are united. In such mergers, forced methods of mergers and acquisitions of companies are often used (from ousting from the market to raider takeovers).

vertical merging. Enterprises that operate in different industries are combined, but are connected by a single technological process (for example, mining, metallurgical and construction company). As in the previous case, along with the civilized methods of merger, rather harsh methods of mergers and acquisitions can be used;

Family fusion. Associations of firms that produce related products (for example, a company from the production of flash memory cards is merged with an enterprise from the production of cameras). Harsh methods of company mergers are used less frequently than in previous cases;

conglomerate merger. Consolidation or absorption of enterprises of different industries that are not connected by any industrial community. The purpose of such mergers may be to expand the product line or conquer new markets (for example, a manufacturing company acquires supermarkets in the region to create additional sales channels. Depending on the attitude of the company's management towards the merger and on what methods of mergers and acquisitions of enterprises are used in each case, namely:

Amicable merger, in which the agreement is supported by the management and shareholders of both parties;

A hostile merger that is carried out against the wishes of the management of the target enterprise.

In order to determine in more detail the future changes and effects of mergers and acquisitions, it is necessary to study the characteristic forms of these processes and the changes they lead to (see Table 1.2.1).

Table 1.2.1

Characteristics of the forms of merger of enterprises

Merger Forms	Change of legal status	Change of managerial powers	Methods for the formation of subordinate ties
Integration	Status changes in both enterprises	Powers are distributed	A new enterprise is created with the transfer to it in the future of the assets of enterprises that merge
Absorption	The status of one enterprise changes, and the second does not	The powers of several or one of the participants terminate	Liquidation of one of the enterprises with further transfer of its assets to other enterprises
Subordination	Status does not change	One of the enterprises loses some of its powers	Obtaining control through the acquisition of shares in the enterprise
Consolidation	Status does not change	Several enterprises lose some of their powers	Obtaining control through the acquisition of shares of the enterprise or their exchange
Creation of the main enterprise	Status does not change	Part of the authority is transferred to the newly created enterprise	Transfer of shares of merging enterprises to a newly created enterprise

Mergers and acquisitions of various in their specifics and sizes of enterprises have their own specific features, depending on which country or region of the world this merger takes place. While in the United States mergers or acquisitions occur primarily in relatively large firms, in Europe, large companies mainly absorb small and medium-sized companies, as well as enterprises of small family firms and joint-stock companies that operate in related industries.

1.3 Motives for mergers and acquisitions

Obtaining a synergistic effect.

The main reason for changing the structure of the company in the form of mergers and acquisitions is the desire to obtain and even enhance the synergistic effect (the complementary effect of the assets of the companies that have merged).

A synergistic effect can arise due to such circumstances:

Savings, this is due to the scale of activities;

Combining complementary resources;

Financial savings by reducing transaction costs;

With an increase in market strength through a decrease in competition (which stems from the monopoly motive);

Mutual complement in the field of any research and development work.

Economies of scale. It is achieved when the average cost per unit of output decreases as the volume of production increases. One of the key elements of such savings is the allocation of fixed costs to more products that are produced. The primary idea of economies of scale is that the amount of work increases while using the same production facilities and existing infrastructure, with the same number of employees and with the same system of allocation of resources and funds. In other words, to use available resources more efficiently. However, one must always take into account that there is a certain limit to the increase in production, at which the excess of production costs can increase significantly, which will further lead to a drop in profitability.

Nevertheless, it should be noted that the takeover of a company into an existing structure is an extremely complex process. Therefore, some companies, having carried out the merger process, without having a single business policy, continue to “pull the blanket over themselves” and are a conglomerate of various business units, even continuing to compete with each other, although they are already one company and must carry out one a balanced purposeful policy in the name of achieving the set interests of the united company, while even if individual management functions are centralized, the economic effect of centralization with this approach of divisions of a single company cannot be achieved. In addition, if a corporation has a complex structure, primarily of a conglomerate type, then, on the contrary, this may entail a significant increase in the number of managerial personnel and the creation of a significant number of "extra" managers and middle managers.

Complementary resources. A merger may be considered feasible and practicable if the companies intending to merge have complementary resources. If in one of the companies there is a shortage of certain resources (material, human, scientific), and in the other there is an excess of them, then this can serve the general benefit of both companies when they merge and are able to provide effective activities. Naturally, the value of these companies after the merger will increase significantly, and in total they will cost more, as if arithmetically adding their values before the merger, because each of the companies will receive the required resources much cheaper than they would cost this company if it were necessary to create them independently and invest own funds

Merging in order to obtain complementary resources is typical for both large firms and small enterprises. Most often, such small enterprises become the object of absorption by large companies, as they can find a quick replacement for missing components for further activity in market conditions. Small-scale enterprises sometimes produce unique and extremely necessary products for the population, but due to their specifics, they are not able to organize large-scale production and sell their products in large volumes. Large companies can create the components they need themselves, or they can get more fast access if they merge with a company that already produces these products in the common market.

monopoly motive. Sometimes when companies merge, their management strives to become the main monopoly player in the market. In this case, the merger provides an opportunity for companies to tame price competition so that it does not turn out that in the struggle for a buyer, any of the producers would be doomed to a minimum profit. However, current antitrust laws in many parts of the world restrict mergers with the clear intent to drive up prices. Sometimes a business that claims to be a monopolist can buy its competitors "wholesale and retail," and doing so and eliminating price competition seems to be more profitable than allowing their prices to fall below average variable costs, since this is not profitable for the company at all.

Saving. The benefits of the merger can be used in the form of cost savings in the development of the latest technologies and the creation of new, previously unproduced types of products, as well as attracting significant investment in new technologies and new products. For example, one firm may have many talented engineers, researchers, innovators, managers, programmers, etc. on its staff, but the firm in question does not have the necessary infrastructure and the necessary capacities to benefit from the new products they develop. Another company may have well-established distribution channels, but its employees are creatively limited; "not enough stars from the sky." If these companies unite, then together they will be able to solve all the problems posed to them. Through a merger, cutting-edge scientific ideas and the cash needed to bring those ideas to fruition can be brought together. This type of fusion is most characteristic of creative youth.

Improving the quality of management. Mergers and acquisitions of companies may pursue the goal of achieving differentiated efficiency. This goal is as follows: management recognizes that the management of the assets of one of the firms was ineffective, however, after the merger, administrative and personnel measures are taken to more effectively manage the assets of the corporation.

There are many companies in nature, the effectiveness of which is held back by a cumbersome, incapable of thinking creatively, the management apparatus. Such companies are more likely to be taken over by firms with more modern systems management. Sometimes better management can either involve a painful downsizing or a major reorganization of the entire business of the company in question.

tax motives. Current current tax legislation sometimes has a stimulating effect on mergers and acquisitions, which can lead to tax cuts or tax benefits. For example, a highly profitable firm that bears a significant tax burden would benefit from acquiring a company with large tax benefits, as a result of which it will be possible to save on tax payments to the budget due to the rational use of tax benefits, but taking into account the level of its profits, this may not be sufficient. advantage.

Production diversification. In other words, the possibility of using excess resources. This is a common reason for mergers and acquisitions - diversification into other types of business. Diversification leads to a stabilization of the income stream, which is mutually beneficial for both the employees of this company and consumers, which is achieved through the effect of expanding the range of goods and services. If the company has temporarily free resources, then immediately there is a motivation for its purchase. This motive is usually associated with the hopes of industrialists for a beneficial change in the structure of markets or industries for their business, a change in orientation towards the possibility of access to new resources and the latest innovative technologies.

The difference between a company's market price and its replacement cost. Most often, it is much easier to buy an already equipped enterprise, with its own staff and management, than to build a new one and recruit personnel for it. This is also appropriate when the market valuation of the target company in monetary terms is significantly less than the cost of replacing its assets.

The difference between liquidation and current market value. In other words, we can say this: the opportunity to "buy cheap and sell high." Often the liquidation value of a company is much higher than its current market value. In this case, the firm, even if it is acquired at a price higher than previously planned, can later be sold "at retail", i.e. in parts, with the seller of the company receiving a decent financial income from this event. From the point of view of the expediency of the event, the liquidation of the company should be carried out only in such circumstances when the economic gains significantly outweigh the possible economic costs.

Managers' personal motives. This can also be interpreted as a desire to increase the political weight of the company's management. There is no doubt that all volitional decisions of management regarding mergers and acquisitions of companies should be based on economic feasibility and only on it, without any lyrical motives. However, history shows that sometimes necessary solutions based more on the personal motives and preferences of managers than on thoughtful and comprehensive economic analysis. This is quite understandable, since the heads of companies and all kinds of “powers that be” do not want to share their main prerogative (power), and besides, they claim to be paid more, and both the scale of power and wages are directly proportional to the size of the corporation. .

Of course, with an increase in the scale of the company, there is a need to use payments of various kinds of bonuses, allowances as a means of long-term incentives for middle managers. These payments represent a significant proportion of all managers' pay and are linked to the cost of capital of the company they manage. In this regard, there are direct incentives for managers to continue to use their profits to acquire more and more assets in any areas of their business.

Expansion of the geography of influence. The expansion of the company's geography creates good prerequisites for entering new sales markets when the possibilities of the traditional market are close to exhaustion. In addition, by becoming a transnational company, the company reduces the likelihood of local political and economic risks and strengthens its position in negotiations with the authorities.

Ensuring economic security, (an accompanying motive is the strengthening of market positions). The motive for ensuring security (including economic) - regarding the streamlining of the supply of raw materials and the sale of finished products, determining prices for them, serves as a fairly strong justification for vertical integration.

Withdrawal of capital abroad. In international practice, as a measure that will ensure the security of capital, the motive for withdrawing money abroad is sometimes used, the screen for which are agreements on mergers and acquisitions.

Growth in earnings per share. In mergers, the reason for the high PPS/EPS (share price/earnings per share) is that investors are attracted by the expected rapid earnings growth in the near future.

If a company has achieved this growth by acquiring a company with slow growth and low PPS/EPS, then it will have to pursue further mergers to maintain this positive trend.

In addition to traditional motives for integration, there may be other, extraordinary ones. For example, a merger for Russian companies is one of the few ways available to successfully counter expansion in the existing market by more powerful monopoly competitors. In general, the entire operation of a merger or acquisition in a business can be calculated in advance, for this it is enough just to have some data about the future target company with which the future takeover will take place. Based on the results of simple calculations, the future absorption strategy is chosen. The main motives for mergers and acquisitions - see Appendix 2.

1.4 Methods for assessing the value of a company during takeovers and mergers

To assess the effectiveness of mergers and acquisitions of companies, different approaches are used, which are based on various criteria. Thus, R. Braley and S. Myers use the benefits measured by the net present effect indicator (NPV) as a criterion for the effectiveness of mergers and acquisitions. Scientist P. Gohan calls this effect Net Acquisition Value (NAV). A. R. Gryaznova and M. A. Fedotova propose to calculate the net present value from the restructuring effect. In the theory and practice of business valuation, there is traditionally a classification of approaches to business analysis based on the initial data used: market approach (comparison of a given enterprise with similar investments already sold), income approach (based on recalculation of expected income), expense approach (based directly on calculating the value of assets enterprises less liabilities).

Each of these approaches has its own methods and features.

Three approaches can be used to evaluate a business: income, expense (or property) and comparative.

A profitable approach to business valuation is based on comparing the investor's future income with current expenses. Comparison of income with expenses is carried out taking into account time and risk factors. The dynamics of the value of the company, due to the income approach, allows you to make the right management decisions for managers and owners of enterprises.

To evaluate enterprises by income, two methods are used: the capitalization method and the discounted income method.

The capitalization method is used when it is expected that future net income or cash flows will be approximately at the current level, or their growth will occur at a moderate and predictable rate. Moreover, if incomes are sufficiently positive, then the business tends to stable development. The essence of this capitalization method is to determine the amount of annual income and the capitalization rate corresponding to these incomes, on the basis of which the price of the company is calculated, while the value of the business will be calculated according to the following formula:

Business value = V = I / R, (1.4.1)

where I - net income; R is the rate of profit (income).

Discounted cash flow method. This method is widely used as part of the income approach to the merger process and makes it possible to realistically assess the future potential of the enterprise. Either net income or cash flow is used as discounted income. Here it should be noted that the amount of cash flow over the years should be determined as a balance between the influx of cash (net income plus depreciation) and their outflow (increase in net working capital and capital investments). Annual net working capital is defined as the difference between current assets and current liabilities.

The method includes several steps:

1) calculation of forecast indicators for several years;

2) choice of discount rate;

3) applying an appropriate discount rate for income for each year;

4) determining the present value of all future receipts;

5) derivation of the final result by adding the residual value of assets minus liabilities to the present value of future receipts.

The cost (property) approach in business valuation is that the value of the enterprise is considered primarily in terms of the costs incurred. The carrying value of the assets and financial liabilities of an enterprise undergoing a merger or acquisition, as a result of current inflation, changes in market conditions, and the accounting methods that are used, as a rule, does not correspond to the market value. As a result, the appraiser faces the question of adjusting the balance sheet of the enterprise. In order to perform this task qualitatively, the appraiser preliminarily carries out the following work:

Assessment of the reasonable market value of each balance sheet asset separately;

Determining the current value of liabilities;

From the fair market value of the total assets of the enterprise, the present value of all its liabilities is deducted. The result shows the estimated value of the company's equity capital.

Basic formula: Equity = assets - liabilities.

The calculation by the net asset value method includes several stages:

A market assessment of the real estate of the enterprise is carried out from the calculated reasonable market value;

The reasonable market value of all machinery and equipment, materials is determined;

Market valuation of intangible assets is carried out;

An assessment of the market value of financial investments is carried out, while taking into account both long-term and short-term investments;

Inventory is converted to current value;

Accounts receivable are assessed;

Estimated costs for future periods;

Are converted into the present value of the enterprise's liabilities;

The cost of equity is determined, which is presented as a deduction from the fair market value of the sum of assets of the present value of all liabilities.

salvage value method.

The salvage value appraisal is applied when the following circumstances arise:

The company is in bankruptcy or there are serious doubts about its ability to continue as a going concern;

If the company is liquidated, then its liquidation value may be higher, as if it continued in operation.

The liquidation value is the value that the owner of the enterprise can receive upon liquidation of the enterprise, having carried out the procedure for the separate sale of its assets. The calculation of the liquidation value of the enterprise mainly includes certain main stages:

A liquidation schedule is being developed different types assets, enterprises: real estate, machinery and equipment, inventories;

The gross proceeds from the liquidation of assets are determined;

The estimated value of assets is reduced by the amount of direct expenses (here we mean commission payments to various legal and appraisal companies, taxes, etc.);

The liquidation value of assets is reduced by the costs associated with the possession of assets for their sale; this includes:

Expenses for maintaining stocks of finished products and work in progress;

Expenses for the preservation of equipment, machines, mechanisms, real estate;

Administrative expenses for supporting the operation of the enterprise until the completion of its liquidation;

The operating profit (loss) of the liquidation period is added or subtracted;

The following articles that suppress the rights to pleasure are deducted:

severance pay and employee benefits;

Claims of creditors for obligations secured by a pledge of property of a liquidated enterprise;

Debts on obligatory payments to the budget and extra-budgetary funds;

Settlements with other creditors.

Consequently, the liquidation value of the enterprise is calculated by subtracting from the adjusted value of all assets of the balance sheet the amount of current expenses associated with the liquidation of the enterprise, as well as the value of all liabilities.

Replacement cost method. This is one of the so-called. "costly" methods for assessing the value of the assets of the company being acquired, based on determining the cost of all costs that are necessary to recreate all assets that are similar to the assets that are part of the property of the company subject to appraisal. When applying this method, all types of costs that are associated with the construction and acquisition of each type of asset are calculated (here we mean design work, materials used, labor costs incurred, etc.). In conclusion, to obtain a complete assessment of the value of the company as a property complex, the balance (difference) between the financial assets and liabilities of the company should be added to the replacement cost of tangible and intangible assets. Thus, the valuation of the business is based on the cost of full replacement of the assets of the acquired company.

replacement cost method. This valuation method is very similar to the previous replacement cost method. When applying this method, you should calculate all the costs required to create an exact copy of the company to be valued. In this case, these costs are considered as the replacement cost of the company being valued. This method differs from the one discussed earlier in that it also takes into account the value of the company's intangible assets, such as the cost of acquiring copyrights, acquisition patents, software companies and other similar costs.

We will also consider a comparative approach to business valuation in terms of mergers and acquisitions, which is presented as a method of comparable sales and a method of multipliers.

The comparative approach is a set of business valuation methods that are based on a comparison of the enterprise being valued with the sales prices of similar enterprises in general or with the sale prices of shares of enterprises of a similar type.

The method of sales, or the method of agreements, which is based on the use of the purchase price of an enterprise - an analogue as a whole or its controlling stake. The technology of applying the sales method practically coincides with the technology of the capital market method. The difference lies only in the type of initial price information: the capital market method uses the price of one share as the initial one, which does not provide any control elements, and the sales method uses the price of a controlling or full block of shares, which includes a premium for control elements. Accordingly, the sales method can be used to value a full or controlling stake in an enterprise to be sold.

The method of comparable sales is a more complex and time-consuming undertaking. It is an analysis of the market prices of controlling stakes in similar companies. Estimating market value using this method usually occurs in several stages:

Gathering information on recent sales of similar similar businesses that have taken place;

Making adjustments to the sale prices of enterprises with the identification of differences between them;

Calculations to determine the market value of the enterprise being valued, taking into account data on the adjusted value of a similar company

In other words, this method is to create a company model. At the same time, the model considers companies that must belong to the same industry as the enterprise being assessed, be similar in size and form of ownership. Adjustments to the market price of the simulated analogue enterprise should be made for the most important positions:

Date of sale;

Enterprise type;

Industry type;

Legal form of ownership;

The sold part of the shares;

Foundation date;

Date acquired by the last owner;

Number of employed workers;

Total sales volume;

Area of industrial premises, etc.

1.5 Takeover and merger protection methods

The term "mergers and acquisitions", which in English sounds like "Merger & Acquisition" (M&A), means a process that results in a formal or informal transfer of control over a company from one person to another. A takeover is amicable when the offer to acquire is supported by the management of the company being taken over and the merger is based on the common will and benefit of the merger. In the event that the management of the company that is being taken over opposes the merger, but the takeover still occurs, such a case belongs to hostile (hostile) takeovers. M&A does not always have a well-defined economic basis. Often this is a way to enter new markets or expect synergies.

Mergers and acquisitions that take place in the Russian Federation are distinguished by their national specifics, which are associated primarily with the history and methods of the primitive accumulation of capital in the 90s of the last century by domestic oligarchs. Main Feature Russian M&A operations are predominantly based on acquisitions rather than mergers, which are characterized by the acquisition of new assets, markets and distribution channels within an existing market segment. In Russia, the acquisition of property in the form of large or promising companies was often illegal, associated with forgery of documents, bribery of government officials, violation of the criminal code, forceful penetration into the territory of enterprises, that is, with actions aimed at depriving the rightful owners of property through a certain sequence of illegal actions .

In order to protect the company from a hostile takeover, it is advisable to apply precautionary measures not only in cases of the risk of taking over the enterprise, but also in advance, excluding such a scenario. In the list of precautions that are part of the mechanism of protection against absorption, we can distinguish the following:

Firstly, the management of the company should not include random, unreliable, unverified people who can work for the raider company;

Secondly, company executives should not sign and hand over blank sheets and other documents;

Thirdly, the enterprise must pay off its debts on time;

Fourthly, the constituent and title documents of the enterprise must be properly drawn up and stored in a safe, secure place.

In the event of a raider attack, the owners and managers of the enterprise should immediately contact law enforcement and other authorities. If specific criminal acts have been committed in relation to the enterprise or facts of corruption and bribery of officials become known, one should also contact law enforcement agencies with a corresponding statement. For characteristics of friendly and hostile takeovers, see Appendix 1.

Considering terms such as "dawn raid", "poison pill", "anti-shark repellent", one might assume that these are the names of operations from the James Bond films, but in fact they are the names of methods for protecting companies from hostile takeovers. All methods of protection against hostile takeover, which are used by companies in the world market, can be conditionally divided into two classes - preventive and active methods. The following preventive methods of protection against hostile takeovers have gained the greatest popularity:

Reorganization: delisting and transformation into a CJSC (LLC);

Redemption of shares from minority shareholders (protection against green blackmail);

- “Freezing out” of minority shareholders (withdrawal of assets and further buyback of shares);

Company section;

Liquidation of the company and transfer of its property to a new legal entity (LLC or CJSC);

Transfer of assets to subsidiaries (CJSC or LLC);

Change of registry holder;

Debt monitoring;

Shark repellant;

The search for the "white knight";

Creation of a strategic alliance.;

Exit to IPO

Let's look at some of the preventive and proactive methods of protecting companies from hostile takeovers.

Dawn Raid (original name - "Dawn Raid"). This method is most widely used in the UK. In this method, a firm or investor attempts to acquire share capital to control the company by instructing brokers to buy certain shares as soon as the stock exchange opens, with the buyer (the "Predator") similarly disguising their identity and true intentions.

Golden parachute (original name - "Golden Parachute"). With this method of protection, the management of a company threatened by a takeover offers its key specialists, who may lose their jobs, significant compensation payments and benefits, for example, the right to purchase company shares at preferential prices, various bonuses, etc. This method is costly (may cost millions of dollars), but is quite effective and is a strong deterrent, as well as allowing you to haggle over the price of the company, citing high staff costs incurred.

Protection against green blackmail (original name - "Greenmail"). This method of protection is applicable when a hostile company owns a significant block of shares, and consists in buying shares from minority shareholders in order to exclude any attempt at a hostile takeover by a predatory company. This method is also known as the "Bon voyage bonus" or "Goodbye kiss".

Macaroni Defense (original name - "Macaroni Defense"). This is a specific tactic in which a company in danger of being taken over issues a certain number of bonds with a guarantee that they can be bought back at a higher price if the company is taken over. Where does this original name come from? What is meant here is that if a company undergoes a takeover, then its liabilities expand like pasta that is boiled in a saucepan. This is a very useful tactic, but the company must be careful not to issue more debt than it can financially support.

People's pill (original name - "People Pill"). If a company is in danger of being taken over, the entire management team is threatened with simultaneous dismissal. This results if they are true professionals, and their departure can seriously bleed the company, which makes the predatory company think twice about the advisability of taking over. However, this may not work if most of the management was somehow planned for dismissal, i.e. Here the main role is played by the human factor.

Poison Pill (original name - "Poison Pill"). With this strategy, the company tries to downplay its attractiveness to a potential buyer. There are 2 types of poison pills. With the "click-in" pill, current shareholders are encouraged to buy more shares at a discounted price, as long as it does not conflict with the company's statute. The purpose of "click input" is to dilute the stock held by a potential buyer, making a takeover of the company unpredictable and expensive. In a "click-back" poison pill, current shareholders are encouraged to buy more shares of a potential buyer at a reduced price in the event that the merger does occur. If investors are unable to financially support this method, the stock will not be diluted enough and a takeover may still occur.

An extreme version of the poison pill, the "Suicide Pill" (originally called "Suicide Pill") is also a means of protecting a company from an unwanted takeover, but this method can have disastrous consequences for the defending company. For example, a company carries out a massive replacement of equity capital with borrowed capital. Of course, such actions can scare away a predatory company, since the takeover process will become too expensive for them, but at the same time, the financial condition of the company itself is deteriorating sharply, it may not be able to fulfill its financial obligations, and in the long term - inevitable bankruptcy for this company .

White Knight (original title - "White Knight"). The White Knight is a friendly company, a kind of "good guy", which makes every effort to protect from capture by the "bad guy" company. The white knight usually offers a friendly merge as an alternative to a hostile takeover.

Repeated recapitalization (original name - "Leveraged recapitalization"). Under this defense method, the company conducts an extensive recapitalization of its assets, issues financial liabilities, and then buys them into its own ownership, while the current shareholders usually retain their control over the shares. This action makes it much more difficult for the company to be taken over.

Fair Price Amendment (originally titled Fair Price Amendment). Under this protection method, a fair price adjustment is included as an addendum to the company's Articles of Association, which prevents the acquiring company from offering different prices for different shares held by the company's shareholders in a takeover attempt. This technique discourages takeover attempts and makes the predatory company pay a higher price.

"Just say no" defense (original title - "Just say no" defense). In this method of protecting a company from being taken over, its management simply go to great lengths to lobby its shareholders against accepting the most tempting offers from the invading company.

Staggering of the Board of Directors (original title - "Staggered board of directors"). This method of protection works when the directors of the company are elected for a term of no more than one year. Therefore, a potential buyer cannot instantly replace the entire Board of Directors, even if it controls the majority of votes. At each annual meeting, one third of the directors and nominees will be eligible for shareholder ratification for a 3-year period. The effect of the protection method is that it takes at least 2 years to re-elect 2/3 of the directors and take control of the Board. And, as a rule, a predator company cannot wait that long.

Restrictive takeover laws (originally called "Restrictive takeover laws"). With this method of protection, those companies that do not want potentially hostile mergers may consider re-incorporation into such corporations that have adopted stricter laws against possible takeovers.

Restricted voting rights (original name - "restricted voting rights"). With this method of protection, a company adopts a legal mechanism that limits the ability of shareholders to vote their shares if their fractional ownership is above a certain threshold level (for example, 15%). This method encourages potential acquirers to negotiate with the Board of Directors, as it can exempt its shareholders from these restrictions.

Defense Jewel (original name - "Crown Jewel Defense"). With this method, a company can sell off its most attractive assets to a friendly third party or merge valuable assets into a separate legal entity. In this case, the unfriendly bidder is less attracted to target assets.

Pac-man defense (original name - "Pac-man Defense"). The name of the protection method comes from the name of a computer game that was popular in the 80s of the 20th century. At the same time, the target firm by all means prevents the predator firm from imposing a tender offer on it, while making a profitable counter offer to the potential buyer.

White Esquire Defense (original name - "White Square Defense"). This method is very similar to the White Knight method, except that this friendly company does not own a controlling stake, but a significant minority stake. With the Esquire there is always a so-called. A "white squire" who has no intention of taking over the company, but is used as a figurehead to protect against a hostile takeover. The White Esquire can often obtain special voting rights for its shares.

The essence of the process

Speaking very simply about this topic, we can imagine the merger procedure as follows: several separate and independent enterprises are combined into a single company. But in such a situation, one organization, as a rule, acts as the dominant one, since it has the most powerful capital and economic potential as a whole. It is from her that the initiative for the merger comes. At the same time, it is worth understanding the fact that the shareholders of those enterprises that took part in the merger retain their shares, only the name of the company changes, but not the amount of dividends.

It is also important to understand that processes such as mergers and acquisitions of companies have some differences.

When one company absorbs another, it redeems all shares or their main part from the shareholders of the organization merging into the main, dominant enterprise. This means that those who owned a certain share of the capital in the acquired structure lose it after the completion of the acquisition procedure.

Modern approach

Initially, as described above, there are two key goals of the merger: the acquisition of new competitive advantages within a particular market and the increase in the welfare of shareholders.

It should be understood that, regardless of what kind of joint-stock company we are talking about, the algorithm for the development of the company will inevitably come to the point when the need arises for an acquisition or merger. In today's market economy, without such a strategy, it will be extremely difficult to take a leading position among active competitors.

If the company is not yet ready for such drastic measures, then you can choose a different path. We are talking about the use of such internal methods as the introduction of new technologies, improving management efficiency, as well as the quality of labor organization. Modern business schemes can also be attributed to this category.

At the same time, external methods, which include the merger of companies, are quite popular in the segment of medium and large businesses.

Action strategy

There is a certain algorithm on the basis of which a successful takeover or merger procedure can be carried out. These are the following steps:

competent choice of the organizational form of the transaction;
the availability of the necessary financial resources to carry out a full-fledged procedure for combining companies;
conducting the transaction in such a way that it does not violate any requirements of the antimonopoly law;
if it was decided to start the process of merging companies, then it is necessary to determine as soon as possible who will occupy a key leadership position;
it will also require the most effective inclusion of both top and middle management specialists in the process.

If you thoroughly approach the implementation of these steps, then the merger procedure will be painless.

When takeover is most relevant

It makes sense to touch in more detail on the main motives for launching such processes. You can start with the situation when a particular firm needs a significant reduction in the risks that are possible within the framework of its core business. To do this, a merger of two or more companies can be carried out, moreover, from different market segments. The merger or acquisition of several enterprises makes it possible to produce different kinds products, while using in the process of marketing finished goods or raw materials such a tool as geographic diversification. This strategy allows the main company to significantly expand the scope of its presence.

An actual merger of companies may be in the event that the company reconsiders the priority of key activities. At this stage, new relevant production areas may appear, replacing the old ones that have become unprofitable.

Finally, a takeover can be a good strategy for a company that is doing well in a particular industry but still needs to strengthen its own position to gain the desired competitive advantage. In this case, the merger is made with organizations operating in the same segment as the acquiring company.

Types of company mergers

There are many forms that the merging of several organizations into one can take. The same can be said about absorption. Here are the most common ones. They will be discussed.

First, it makes sense to mention conglomerate and generic mergers.

The first type characterizes this type of association, in which companies that do not have any commonality on a production basis merge. That is, we are talking about enterprises from completely different industries. This means the absence of any connection (competition, consumption and supply of goods).

When structures without technological and target unity are combined in a conglomerate format, this often leads to the abolition of the main activity of the integrating enterprise. Instead of a key profile, many equal directions of production appear.

A generic merger of companies looks somewhat different. In this case, it should be understood that we are talking about enterprises that produce interconnected product groups. An example is the merger of a company producing mobile gadgets with an enterprise specializing in digital technology as such.

When management disagrees

Another group of mergers, defined in relation to the transaction of managerial personnel, is friendly and hostile associations. In the first case, the initiative of such a process is supported by both the heads of organizations and the shareholders of both enterprises.

But the hostile form implies that the planned transaction does not receive the approval of the leadership of the structure that should be absorbed. As a result, certain anti-seizure measures can be taken. With such a reaction, the owners of the initiating company begin an aggressive game in the securities market, aimed at absorbing the target.

National and transnational format

It is worth noting that sometimes the merger of companies can take place within the framework of the 50/50 principle. But the experience of many firms has shown that such a parity model of integration is extremely difficult to implement.

Now for the national merger. This term is used to define the combination of companies that are located in the same country.

The definition of transnational integration is used to describe the merger of enterprises located in different states.

Vertical and horizontal type

This direction is determined depending on the nature of the merger.

The image of the vertical is used to describe integration, in which companies from different industries that have a common technological process for the production of finished goods are combined. In other words, the firm initiating this process extends the subsequent production stages to the end consumer, or the previous ones up to work with sources of raw materials. An example is the integration of metallurgical, machine-building and mining enterprises.

The horizontal merger of companies is distinguished by the fact that the specifics of the activities of the structures completely coincide within the industry, the direction of production and its various stages, inclusive.

Association methods

If we take into account exactly the way in which the integration of companies is carried out, then two key areas can be distinguished:

Corporations. This type of merger is used when it is necessary to merge all the active firms that are involved in the transaction.
corporate alliances. In this case, we are talking about the takeover or merger of two or more companies whose activities are deployed within a specific type of business. Such a transaction allows, as a result, to obtain a synergistic effect only in the direction of this type of activity. As for other production areas or types of services, the dominant organization is engaged in them independently, without involving additional resources from outside. Separate structures can be created to organize alliances.

The most striking examples

Acquisition initially implies a procedure that should ultimately give the dominant company a significant competitive advantage. Nevertheless, there are also cases when the merger of sufficiently serious firms ends in failure.

Considering the largest mergers of companies, the first example is the 2001 acquisition of the AT&T division by the media conglomerate Comcast. This allowed the latter to take one of the leading positions in the United States in the cable television market. This process required quite serious expenses in the amount of 76.1 billion dollars. This strategy of buying out the selected company piecemeal has had a tangible positive effect.

Competent actions of Comcast led to the fact that at the same time there was a neutralization of the key competitor in the field of activity relevant to them and an increase in the quality of services provided by expanding the geography of the cable network.

To better understand what consequences a merger can generate, examples of the negative outcome of such a process should also be studied.

One of the most costly and unsuccessful was the merger of AOL and Time Warner Cable. More than $180 billion was allocated by AOL to conclude this deal. Initially, everything looked more than promising, but in the end, both companies dropped out of the list of leaders within their segment. As one of the key reasons for the collapse of the Internet giant AOL, experts cite the loss of financial flexibility after carrying out an excessively costly merger procedure.

Now we should return to successful transactions and pay attention to the merger of Mobil and Exxon. In principle, at first glance there is nothing interesting here. But if you delve a little into the history of these enterprises, you can find out that initially they were one entity, until 1911 being part of the Standard Oil Company, owned by John Rockefeller. The long-standing division occurred on the basis of an antitrust court verdict. As a result, the once fragmented capital united again, although only partially. But even this was enough to obtain powerful competitive advantages.

How are things in Russia

On the expanses of the CIS, the merger of large enterprises takes place somewhat differently than on the Western market. If we try to highlight the most common format in which the merger of Russian companies is carried out, then it makes sense to pay attention to the integral form.

In the current crisis of non-payments, vertical associations provide one key advantage - to neutralize such a problem as receivables. With the help of such transactions, production tasks are also solved.

It is also important to note the fact that the merger of Russian companies in the vast majority of cases is markedly politicized. Such transactions are used within the interests of representatives of the local administration or more high levels authorities.

Merger Features

A surge in associations of various kinds in Russia was recorded throughout 2003, when it reached a total level of $22.9 billion. But in the following year, this figure dropped slightly.

When it comes to various kinds of mergers, the state often acts as the main player. Basically, the enterprises operating in the oil and gas sector, as well as in the segment of metallurgy, are taken into account.

As for the interests of foreign enterprises, they also choose representatives of the oil and gas industry for integration, but do not forget about the food sector.

What does a merger look like in Russia

As one of the clearest examples of the merger process in the CIS, one can cite the experience of such an enterprise as UMMC-Holding LLC. This company has consolidated 10 processing, non-ferrous and ferrous industries. At the moment, the sphere of direct influence of the UMMC includes the control of 22 companies located in 7 cities of the Russian Federation. This also includes the Litaskabelis plant operating in Lithuania (Panevėžys city).

The key goal for which numerous merger procedures have been initiated is to increase the company's market share. It was the integration that allowed UMMC to create additional production capacity. Also, investment risks were significantly reduced, since only those companies, whose functioning was verified by the real market, joined.

Results

In today's economy, mergers and acquisitions are a relevant dynamic development prospect for many companies that have ambitions, but do not have sufficient capacity.

At the same time, it is worth mentioning that integration is a risky process. In case of unsuccessful forecasts, it is possible to suffer such financial losses, after which the enterprise will no longer be able to recover.

Organization of transactions

Creating value

The Mergers and Acquisitions Process from a Seller's Perspective

Classification of the main types of mergers and acquisitions of companies

Transaction motives

Impact on the economy

Major Mergers and Acquisitions

Deals in the 1990s

Transactions since 2000

Transactions in 2009

see also

Notes

See what "Mergers and Acquisitions" is in other dictionaries:

Books

What do mergers and acquisitions mean?

Absorption

Merger of firms

Features of Mergers and Acquisitions

Reasons for takeovers and mergers

The financial side of the merger of companies

What does the term "vertical and horizontal type of fusion" mean?

What are the ways and formats of the process

Merge Format

The brightest examples

How Mergers and Acquisitions Happen in Russia

Features of a merger in Russia: what such transactions look like

Conclusion

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CHAPTER 1. THEORETICAL

1.1 Absorption and merger - concepts and terms

1.2 Types of takeovers and mergers

1.4 Methods for assessing the value of a company during takeovers and mergers

1.5 Takeover and merger protection methods

Similar Documents

The essence of the process

Modern approach

Action strategy

When takeover is most relevant

Types of company mergers

When management disagrees

National and transnational format

Vertical and horizontal type

Association methods

The most striking examples

How are things in Russia

Merger Features

What does a merger look like in Russia

Results