Takeover of corporations. Mergers and Acquisitions: Tax Consequences. income tax

Acquisition and merger of companies is a series of economic and legal procedures aimed at combining several organizations into one economic unit. The merger procedure is based on the principles of voluntary consent of all parties to the transaction.

Mergers and acquisitions of companies: main features of the processes

The economic theory and regulatory framework of the Russian Federation explains the concept of "merger of companies" in a different way than analogues of foreign experience.

So, with a foreign interpretation under merger companies refers to the combination of several operating firms, the result of which is the emergence of a single business unit.

If guided by the legislative acts of the Russian Federation, then in the case mergers companies, a new legal entity is created, which becomes the assignee of all obligations and rights of the reorganized companies in accordance with the transfer act (clause 1 of article 58 of the Civil Code of the Russian Federation), and the participants themselves, who were considered separate companies before the merger procedure, cease to exist.

Thus, according to Russian law, prerequisite the merger transaction is the registration of a new legal entity. For example, there are three companies, A, B, and C. Entity A completes a merger with firms B and C, as a result of which a new enterprise D is formed, and the rest are canceled. At the same time, management, assets and liabilities of A, B and C are fully transferred to the management of company D. Foreign practice implies that one of the merging economic objects continues its work. Such a process in the legislation of our country is called "accession" (A = A + B + C).

The legislative base of the Russian Federation clearly distinguishes between the conditions for the implementation of "merger" and "acquisition", and also has a third concept - "accession", which is not found in the laws of other countries.

A takeover differs from a merger in that, as a result of the first, one company buys out another, completely taking control over it into its own management. At the same time, the “eating” company acquires at least 30% of the authorized capital or a block of shares of the administrative and economic entity that goes under its control.

A merger is an association of two or more economic entities, as a result a new united economic unit is formed.

The merger of companies can occur according to one of the following principles:

1. The restructuring of economic entities occurs with their complete further liquidation as legal and tax forms. The newly formed company acquires all the assets and liabilities of the firms included in it.
2. Asset merging - there is a partial transfer of the rights of the companies participating in the merger as an investment contribution. At the same time, the participants retain their administrative and economic activities.

Any type of merger of companies is accompanied by the obligatory formation of a new legal entity.

How not to lose valuable employees during a merger or acquisition of companies?

Your competitors may find out about an upcoming merger or acquisition of the company and start an aggressive hunt for the best employees. To retain valuable staff, follow the instructions from the editors of the magazine "CEO".

When joining, one of the restructured companies is the main one and remains as a legal entity after the conclusion of the transaction, the remaining participants are dissolved. The main company thus receives all the rights and obligations of the canceled firms.

Practical economics knows the following reasons for the merger of companies:

• the desire of the owners of enterprises to enlarge the business;
• reducing costs by increasing the volume of activities;
• the desire to increase revenues through synergy;
• change of coordination of activities by methods of diversification, while the goal is either to change the market space, or to expand the range of manufactured / sold products;
• combining the potential of complementary resources of different companies;
• subjective grounds of top managers of firms;
• improvement of management technologies;
• monopolization and acquisition of competitive advantages;
• protection measures.

Often, a measure of merger is resorted to simultaneously for several reasons. The purpose of a merger is always to achieve greater financial results through joint management and increase the efficiency of firms involved in this process. The practical experience of merging companies in the Russian market has shown that this event provides an opportunity to join the progressive global economic system and acquiring additional priorities in a healthy competitive environment.

The companies participating in the reorganization set themselves basic goals company mergers:

• market expansion;
• improving the quality characteristics of products;
• cost reduction as a competitive advantage;
• increase in the range of manufactured / sold products;
• increasing awareness and emotional content of the brand;
• product differentiation;
• introduction of innovative technologies,
• the acquisition of greater competitiveness in foreign economic relations;
• increase financial result from doing business;
• escalation of passive income;
• increasing investment potential;
• increasing creditworthiness and investment attractiveness;
• increase in working capital;
• appreciation of own shares;
• improvement of the profit system.

Merger of companies: pros and cons of the operation

Mergers and acquisitions of companies are attractive for their pluses:

• high probability of obtaining a quick positive effect;
• this measure is highly competitive;
• the likelihood of obtaining control over significant intangible assets as soon as possible;
• geographical expansion of business;
• taking control of an already established organizational system;
• instant acquisition of a market sector;
• the purchase of working capital at a previously underestimated value is probable.

Here are those minuses these events that are known to businessmen:

• significant cash costs associated with the payment of penalties to former shareholders and employees of the canceled companies;
• a “miss” is likely in assessing the benefits of the transaction;
• when doing business in various industries, the process of merging companies is a complex and costly operation;
• upon completion of the merger or takeover, there may be difficulties with the employees of the acquired company;
• when restructuring foreign companies, there is a risk of national and cultural incompatibility.

Types of company mergers: grounds for classification

Today, corporate management distinguishes between various options for mergers and acquisitions.

The classification features of these procedures are:

• type of business combination;
• national and cultural specifics of restructured organizations;
• the position of companies in terms of the integration deal;
• method of connection of resources;
• type of assets;
• company connection technology.

To the extent that type of union bears this procedure, differentiate the types of mergers.

1. Horizontal merger - the integration of companies of the same type operating in the same area, or producing / selling a similar product, having the same technological and technical structure of the production process;
2. Vertical merger - the connection of diversified organizations that are in the same production system, that is, when the main company takes control of the previous stages of production closer to the source of raw material, or further stages - to the consumer.
3. Generic association - productions working on an interconnected product merge. An example of such a merger would be when the production mobile devices connects with the development company software or with a manufacturer of cell phone accessories.
4. A conglomerate association is a merger of diversified companies that do not have industrial, technological or competitive similarities. In this type of integration, the concept of main production disappears. Conglomerate mergers are of the following types:
5. A merger of companies with an increase in a number of assortments (product line extension mergers), i.e. when restructured companies produce non-competing products, but have the same distribution channels and a similar technological production cycle. An example of this type of action is the purchase of Clorox by detergent manufacturer Procter & Gamble, which was specialized in the production of bleaching laundry detergents.
6. Expansion-geographic merger of companies (market extension mergers), i.e., when additional territories for the sale of a product are acquired. An example is the purchase of hyper- and supermarkets in previously unserved areas.
7. A true (pure) conglomerate merger where there is no similarity.

By national and cultural specifics restructured companies distinguish between mergers:

• national - the business entities being combined conduct their activities in the territory of one country;
• transnational - there is a merger of companies from different countries (transnational merger) or the purchase of firms located in another country (cross-border acquisition).

Recently, as part of the trend of business scale, mergers and acquisitions of enterprises are practiced not only from different states, but also from multinational corporations.

Looking at what position of companies in the conditions integration deals, share:

• friendly merger of companies - occurs when the management of the companies comes to a mutual decision that in the face of fierce competition, the merger will help build a more profitable business;
• a hostile merger where the managers of the target firm do not want the deal. The purchase of the target company occurs through a tender offer for stock market acquisition of a controlling stake.

According to various joining technique resources distinguish forms of merger of companies:

• corporate alliances - a merger of companies, the task of which is to obtain a positive synergy effect in a particular business area, in other segments of the company's activities they work independently. To organize a corporate alliance, separate infrastructures or joint ventures are often created;
• corporations - at this event, the pooling of resources takes place in full, in all areas of the companies' activities.

From what view assets are prioritized transactions, there are mergers:

• mergers of production assets - imply the combination of the production potential of companies in the expectation of expanding the scale of production and reducing costs;
• merger of financial assets is the pooling of the capital of companies in order to take a leading position in the stock market or to obtain additional profit from investment activities.

The process of integration of companies can take place in equal conditions (50/50). But as practice dictates, equal conditions always create additional barriers to achieving the intended heights and benefits. A merger can always end in a takeover.

What type of merger the restructuring companies will determine for themselves depends not only on mutual benefits, but also on the conditions of the market environment, as well as on the potential that each of their business entities has.

The global practice of mergers and acquisitions also has specifics depending on the country in which the organizations operate. A striking example of this is the trend towards mergers and acquisitions in America. large corporations. Conversely, in the European part of the world, companies that organize small family businesses or small joint-stock companies in one market sector most often become target companies.

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Methods of merging companies in European practice and the practice of the Russian Federation

Mergers within Europe are governed by Directive No. 78/855/EEC of October 9, 1978, which defines two ways to merge:

• acquisition or acquisition of assets of small firms by any big company, in which the infrastructure of the participants in the merger is partially preserved;
• organization of a new company by transferring to it a full package of rights and obligations of the firms that have joined it, in which the structure of each participant in the transaction is completely changed.

Merger of companies through takeover - a merger, the result of which is the transfer of all property and obligations of the company / companies to another economic unit without liquidation of the former on the terms of payment of dividends to the shareholders of the acquired company in cash or in the form of shares of the acquired company, but not more than 10%. At the same time, the organizations that were absorbed are dissolved.

Merger of companies through the establishment of a new company - an event that takes place according to European standards in such a form, when all the property and obligations of the company / companies are transferred to another economic unit without liquidation of the former on the terms of payment of dividends to the shareholders of the acquired company in cash or in the form of shares of the new company, but not more than 10%. At the same time, similarly to the first case, the organizations that were absorbed are dissolved.

The concept of "fusion" is sometimes used in the case of a merger of several organizations of the same type in terms of production characteristics.

Restructuring Russian companies in the form of mergers/acquisitions looks somewhat different.

The legislative framework of the Russian Federation, similar to European practice, methods of "merger of companies through acquisition" and "merger of companies through the establishment of a new company" are considered as procedures for the transformation of companies in the form of a merger and accession of legal entities.

Normative legal acts of the Civil Code of the Russian Federation also regulate the following measures of integration of companies:

• formation on the basis of the existing legal entity of a subsidiary / dependent company;
• organization of organizations in the form of unions or associations;
• contractual relations between persons - participants in business legal relations (financial and industrial groups, a simple partnership agreement);
• purchase of the organization's assets by another company;
• acquisition of shares (shares) of a company (purchase of securities with payment in cash or purchase of securities with payment with other securities).

Organization of the merger: M&A agreement

The positive effect of the merger/acquisition transaction depends on the following factors:

• determination of the optimal type organizational form mergers or acquisitions;
• carrying out the transaction in strict accordance with the antimonopoly policy of the state;
• sufficient financial resource to complete the integration;
• the fastest possible and mutual decision-making on the choice of the main participant in future relations;
• instant connection to the operation of combining the staff of the highest and middle levels.

In the merger process, it is important to remember from the beginning of the process (idea) to its completion the essence of these measures is to obtain a positive effect through joint activities and, as a result, to obtain more profit. When planning this type of restructuring, the most important tasks will be to establish the type of transaction, the ultimate goal and develop a strategy.

Throughout the synergy, it is important to see not only the positive impact of the merger, but also the mistakes made in the merger process. The guideline for the management of the newly created union should be not only obtaining a synergistic effect, but also maintaining it.

The merger/acquisition process can take place in the following ways:

• Entity A acquires the assets of Entity B by paying in cash;
• Entity A acquires the assets of Entity B by making payment in securities issued by Entity A;
• entity A acts as a holding company, acquiring a controlling interest in entity B, which remains an active economic unit;
• Entity A and Entity B exchange their shares;
• the result of the merger of organizations A and B is the emergence of company C. Participants A and B proportionally exchange their securities for shares of company C.

Carrying out a transaction in strict accordance with the antimonopoly policy of the state is one of the conditions for obtaining a successful merger or acquisition.

Any state controls this species restructuring of companies at all its stages. The state authorities of the country in whose territory a merger or acquisition takes place have the right to suspend the transaction at any time if the actions of its process are contrary to antimonopoly policy. Russian entrepreneurs those wishing to enlarge their business by merging companies, under certain conditions, are required to obtain the consent of the Federal Antimonopoly Service of Russia to complete this transaction (clause 8, part 1, article 23, part 1, article 27 of the Federal Law of July 26, 2006 No. 135-FZ " On the protection of competition).

The merger/acquisition transaction is also controlled by the tax authorities. So, if the merging companies act as sellers of their securities, then it is their responsibility to pay tax on capital increases. The transaction is not subject to taxation if the old shares are exchanged for new ones.

If the transaction is recognized as taxable, then a mandatory measure will be to review the value of the assets of the affiliated company in order to identify profit or loss and calculate tax on them.

The tax status of this transaction also affects the amount of taxes that the company pays after the takeover. When a transaction is recognized as taxable, the assets of the affiliated company are revalued, and the resulting increase or decrease in their value is treated as profit or loss subject to tax.

The financial resource required to complete a merger or acquisition is calculated based on how the members of the association evaluate the synergy effect from this event. If future results are inflated, then most likely, many of the buyer's cash costs will be unjustified.

The decision to merge or take over should not be at odds with strategic goals participating companies.

The process of merging companies sets itself the solution of such important tasks as:

• increase in volumes (association of one-industry enterprises);
• territorial expansion;
• reducing risks and acquiring additional competitive advantages (vertical merger);
• increase in the range of manufactured / sold products, improving the manufacturability of the processes of the main activity, etc.

Registration of contractual relations and their specificity in the merger of companies with limited liability.

This measure and its legal registration regulated by Art. 52 of the Federal Law "On Limited Liability Companies".

The lawyers of each party to the transaction develop merger agreements before the general meeting of the owners of the merging companies is scheduled. When all positions of the contract are approved, the latter is signed by persons endowed with the functions of the sole executive body each side (general director, president, etc.).

According to paragraph 3 of Article 53 of the Federal Law "On Limited Liability Companies", the merger agreement should reflect:

• stages and rules of the merger process:
• date and terms of appointment of the general meeting of participants of the merging companies;
• stages and terms of notification of creditors;
• the date and timing of the appointment of a joint meeting of participants in the companies with a full breakdown of the rights and obligations of each party to the agreement;
• stages and terms of publication of the fact of the transaction in the media.
• stages and conditions for the mutual exchange of shares of the integrating companies and the newly created LLC.

Those shares of the company being transformed, which are part of another LLC - a participant in the merger, are automatically canceled.

It is important to remember that the authorized capital of an LLC during reorganization is formed exclusively from the liabilities of the legal predecessor (authorized capital and other own funds). At the same time, when establishing a new LLC, only assets are taken to form the management company.

Any transfer of assets is regulated in accordance with the deed of transfer (clause 1, article 58 of the Civil Code of the Russian Federation, clause 5, article 52 of the Law "On Limited Liability Companies").

The authorized capital of the new LLC formed during the merger transaction includes:

• the authorized capital of all LLCs - participants in the association;
• other own funds LLCs being reorganized (additional capital, retained earnings, reserve capital, etc.).

This principle of formation of the authorized capital was developed for joint-stock companies, but in practice it is also applicable to LLC.

The authorized capital of an established LLC cannot be less than 10,000 rubles (paragraph 2, clause 1, article 14 of the Law "On Limited Liability Companies").

The merger agreement enters into force after it is signed by all parties at a joint meeting of participants in the companies being reorganized, which is also reflected in this document to avoid possible misunderstandings.

When merging limited liability companies, the deed of transfer reflects the following provisions.

1. Conditions for the transfer of rights and obligations of reorganized LLCs to an established company, regarding all articles of accounts payable and receivables of the former (clause 1, article 59 of the Civil Code of the Russian Federation). If this item is not spelled out in the deed of transfer, then the tax authorities may refuse to establish a new LLC (paragraph 2, clause 2, article 59 of the Civil Code of the Russian Federation).
2. Deeds of transfer are drawn up by each company participating in the merger process. Thus, there will be as many deeds of transfer as there are parties to the merger/acquisition transaction.

Practitioner tells

Andrey Voronin, owner of ATH Business Travel Solutions, Moscow

Twice I myself had to observe the merger of two companies, which is called "from the inside." Each time, I witnessed how, in this difficult time for the company, the aggressive attack of competitors is manifested in the active poaching of the best personnel of a vulnerable society to their staff. They are often guaranteed wage 30-50% above average. We had our own strategy to keep the most valuable employees on our side.

Show everyone that you are one team. Significantly reduces the unfavorable environment in frames teamwork: for this, the very first step will be to move the two companies into one office immediately after the signing of the merger documents. In the case when it is not possible to immediately connect the teams, at least make sure that all the information disseminated is the same. Our experience was an example of such a situation: branches of the merging companies were located in different cities - from St. Petersburg to Yuzhno-Sakhalinsk. An excellent solution for us was the holding of general meetings with their obligatory broadcast via Skype, so employees in all cities were aware of the decisions of the management team. To show that we are all one team, it is necessary not only for the team, but also for clients. So, for us, such a significant event was a conference on Sakhalin, where we invited not only employees from the company merged with us, but also customers from the Far East. So everyone understood that territorial changes do not in the least affect the results of our work.

Insist that you are not merging one business into another, but building a new one, taking the best from both companies. Thus, before the merger, our company could interact with the consumer in two ways: either the client received information directly in our office, or the service was remote. The merger with another company allowed us to apply their experience of other cooperation options.

Show employees career opportunities. The positive mood of the team increases significantly when you show them the possible prospects for business growth after the merger. An example of the positive impact of a merger and a great motivating impetus would be an increase in salaries or getting long-awaited positions for some employees.

Introduce people from both companies. Often, the teams of the merging companies are configured with mistrust and doubt about each other. The situation will be replaced by their speedy acquaintance in an informal setting. In this regard, we were lucky: the merger took place in December, and the New Year's corporate party fit perfectly into the team building program. The small room deliberately chosen for this played an excellent role: in cramped conditions, but not offended. In general, it was not to be bored. I also advise you to consider the pastime of employees in a playful way, when the principle of a set of commands is based on a sign that has nothing to do with belonging to one or another company. For example, bowling or paintball with teams formed according to the zodiac sign.

Once we held a charity event, during which employees bought hand-made crafts from each other. The idea of ​​a good deed for the benefit of a talented child from low-income family brought the team together even more. All proceeds from this charity bazaar were put into a bank account for the boy's admission to a partner school in South Wales.

Instruct the HR director to hold face-to-face meetings with each employee. Individual conversations will help to positively set up the employee, find out his expectations and anxieties, as well as find out the general mood of the team. They give an understanding of which employees need additional motivation. Yes, this is a painstaking process, but a strong and cohesive team as a result is worth it. So, we had the first meetings with the staff held by me personally, and then the matter was entrusted to the HR director. The process of adaptation of employees in our company took almost five months.

An excellent solution for discussing individual proposals was the opportunity to anonymously ask questions to the governing body on an Internet resource for which a corporate website can be adapted. Participation in a cause that binds by common interest will also unite people. To do this, you can create separate project teams from employees who previously belonged to different teams.

In the matter of personnel, the most important thing is not to let things take their course.

Merger process: 7 stages

The process of merging companies in the classical version includes seven main stages.

Finding out the main tasks of the merger

The main goal of mergers and acquisitions is to achieve the highest results through joint activities and, as a result, increase the capital of the company and the income of business owners. Obtaining additional competitiveness can be achieved both by internal resources (improving the organization of management, introducing technological and technical innovations, increasing the production capacity of an enterprise, etc.), and external (mergers and acquisitions of companies).

Identification of alternative ways to achieve the goals

It is important to determine whether it is possible to achieve the goal by other, less risky methods than mergers and acquisitions. These may include procedures for developing a new corporate marketing strategy, acquiring/building new fixed assets, increasing internal capacity, and other restructuring measures.

Identification of a target company, search for a candidate for a merger, purchase

The most accurate assessment of the capabilities of the selected company and the expected synergistic effect will be important.

Preparation for the transaction includes the following steps:

1. A study of the sphere of unification. The first step will be the analysis of the market sphere chosen for the merger or acquisition: assessment of the growth dynamics of its structure, the likely distribution of potential, the impact of foreign economic forces on it, the identification of opportunities in its structure associated with competitors, government authorities and scientific and technical research, analysis of the dynamics of demand and suggestions regarding the chosen structure. When evaluating a selected company, the first thing to do is examine its existing assets and liabilities.
2. Research of own possibilities. After the area of ​​association is chosen, the company must conduct an objective self-assessment, determine its own potential, due to which the value of the acquired company is calculated. Based on the results of the analysis, the criteria for possible merger of candidate companies are determined.
3. The study of competing forces. A greater likelihood to feel all the advantages of a merger of companies and achieve a positive synergistic effect appears with a thorough study of the capabilities of competitors. By analyzing the actions of competing companies, it is easier to determine the future strategic direction and the long-term effect of intentions. Playing blindly, without guessing the opponent's next move, can only lead to a loss.

Having determined the industry of the target company, its capabilities and main characteristics, there comes the moment of choosing a specific company among the huge mass of economic entities. Important criteria in determining the candidate will be: the scope of market activity, the volume of labor and income, the territorial coverage of the market, the private or public form of organization.

Options used in the practice of searching for a target company:

1. Application of established relationships in this market segment. Established contacts, especially within the same field of activity, often help to select a candidate for acquisition.
2. Appeal to agents involved in the sale of operating companies. Intermediaries can be brokerage companies and investment banking structures. When choosing this path to find the right company, it is important to remember that the criteria passed to the intermediary may be a large number of firms, which complicates the selection process.

Analysis of the selected target company

All organizations selected according to the criteria must be carefully reviewed for future and present opportunities.

The task of this stage is to determine the most profitable party for a merger or acquisition. To do this, the goals of the firm-buyer are compared with the characteristics of each selected company. Technological and technical resources, information about the infrastructure and capital of the company are taken into account.

1. Finding out the positive achievements that can be achieved through a merger or acquisition. The real idea of ​​the possible synergistic effect largely determines the success of the company reorganization procedure. Careful attention is paid to the calculation of opportunities from the transformation of companies: combining production resources, distribution channels, expanding the geography of the market, reducing production and labor costs, technology exchange, and so on.
2. Explore the potential for value calculation through company transformation. You can find out the potential of the proposed merger by comparing the target company with the leaders in this segment. Do not forget that the changes will have to go through not only the acquired company, but also the buyer himself. It is necessary to make realistic forecasts and, if possible, turn all changes in a favorable direction.
3. Valuation of the target company. When there is a merger of companies, the value of the target company is formed by the following characteristics: internal resources (calculation cash flow in a merger or acquisition) and external (average market prices, comparative evaluation similar deals). After determining the financial side of the issue, the decision is formulated in the primary agreement, which also contains an explanation of each stage of the merger or acquisition process. Further, actions are taken to complete this transaction (negotiations with state antimonopoly structures, intra-corporate preparation for merger, identification of sources of integration).
4. Checking the target company for reliability (due diligence). Information obtained from certain sources may influence the formation of the value of the company being bought, which will be reflected in the document of intent.

Approval of a resolution on a merger or acquisition. Development of an action plan

Implementation of all stages of the planned plan, taking into account the newly appeared changes

Mergers/acquisitions of companies is a delicate and complex process that is difficult to bring to a single model. Despite the significant experience of the Russian and foreign markets in this method of company restructuring, many organizations do not achieve the positive effect that is expected at the time of integration planning. The success of such transactions depends not only on how conscientious the approach to planning and distribution of responsibilities was, but also on the correct use of the opportunities opened up by the merger. The uncertainty that the process of merging different economic units brings with it can cause the loss of valuable personnel and significant customers, lead to unplanned expenses and lead to the loss of already won market positions.

Analysis of the result of the transaction

After a certain time, the result achieved by the merger or acquisition is analyzed, the goals achieved or not achieved by the integration are determined.

The specifics of the process of mergers and acquisitions.

Permission to make a transaction from the federal antimonopoly authority is required when:

• the total book value of the assets of the acquirer and the issuing company (whom they buy) is more than 3 million rubles:
• the total revenue of the reorganized organizations for the year preceding the transformation is more than 6 million rubles;
• the acquiring company or issuer is included in the Register of economic entities with a market share of a certain product/service of more than 35%.

Analysis of the effectiveness of mergers and acquisitions of companies

There is an opinion that a merger of companies will be effective if you simply choose a company from a progressively developing market area and acquire it at a relatively low price. However, this judgment is erroneous.

The analysis of the effective completion of a merger or acquisition operation includes the study of many moments:

• calculation of cash receipts and expenses, calculation of the financial result from the merger process;
• determining not only the goals of the merger of companies, but also finding out the parties that are in plus and minus from the integration transaction;
• formulation of the problems that appeared with the implementation of the merger, in the field of personnel, tax collections, legal restrictions, accounting difficulties;
• taking into account the basis on which the merger was made: restructuring of companies on an unfriendly basis often carries a lot more contingency costs than a transaction on a voluntary basis.

Often, the beginning of the analysis of the effect of the integration of companies is the estimated financial achievements of the target company, which includes any increase in the money supply or reduction in costs. Further, the resulting discounted values ​​are compared with the acquisition cost. The resulting positive difference from the projected financial flow of the target company and the value of the transaction is defined as the net benefit. In the case when the difference is negative, the decision on the merger of companies must be reconsidered.

For this comparative analysis you need to use the following data:

• future capital increase of the target company in the future;
• the value of the discount rate;
• cost of capital to determine future cash flow;
• the real value of the target company.

The disadvantage of this technique is that the information obtained does not always correspond to the real state of affairs.

The reason for this is that the determination of the price of the acquired company is subjective. The projected net benefit may be positive not because the merger has a positive effect on the business, but because the target company's real future capital increase is overstated. But if the forecast is too low, the failed restructuring of companies, which is really necessary and appropriate, will aggravate the existing business.

It is important before the transaction and its planning to determine for what reasons the cost of the merged companies will be greater than the price for each before the transaction, to calculate the economics of all benefits and costs.

Financial benefit (the same synergy effect) appears only when the value of the established company as a result of the merger exceeds the sum of the values ​​of all parent companies before the transaction.

Analysis of the synergistic effect and its determination numerical value‒ one of the most difficult tasks when studying the results of a union.

After the financial benefit of the future transaction, i.e. its synergy effect, is known, it is necessary to determine the estimated financial costs necessary to implement the merger plan.

If the purchase condition of the target company is the immediate calculation of its full value, then the costs will be determined as the difference between the money paid for it and the market price of the acquired company.

Assuming that when the target company is acquired, its market value is paid immediately, then the cost of acquiring a company can be defined as the difference between the cash paid for it and the market value of the company.

Expenses in excess of market value company, are paid to shareholders of the acquired company or business owners in the form of bonuses. Often, the benefit received by the acquired company does not exceed the costs incurred by the acquiring company. This is due to the fact that the implementation of the transaction is always accompanied by payments to banks, payment for consulting, lawyers and, which fall on the shoulders of the acquirer.

The difference between all of the above benefits and costs is defined as net present value.

A positive value of this indicator indicates the expediency of a future transaction.

To assess the synergistic effect of the merger of joint-stock companies, it would be reasonable to take into account the behavior of investors regarding the shares of the newly created company. For example, if the prices for the shares of the acquiring company fall after the publication of the fact of the upcoming transaction in the media, it can be judged that investors doubt the benefits of the future merger, or why they consider the value of the target company to be unreasonably high.

It should also be taken into account that for a really good company, when selling, the demand for it increases, and the process of buying and selling is more like an auction “who will offer the most”. Taking the upper hand in such a struggle may entail unreasonable costs.

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What can a company merger lead to?

Such transformations of economic units, such as mergers or acquisitions, can affect the future affairs of companies in different ways, both by providing additional benefits and reducing their results. economic activity. Numerous studies to determine the net synergistic effect on the experience of companies already restructured by this method show completely different results.

So, according to "Mergers & Acquisitions Journal", more than 60% of all integrations do not justify the finances invested in them. The Price Waterhouse audit network studied 300 mergers over the past decade and concluded that 57% of companies transformed by mergers or acquisitions perform worse than similar companies in the same field of activity. Often a bad merger experience forces companies to separate again in order to return to the indicators that were achieved in the course of independent management.

According to analysts, the negative effect of the merger may arise for the following reasons:

• incorrect assessment of the opportunities of the industry or target company chosen for the merger;
• an error in the calculation of the finances necessary for the implementation of the integration;
• wrong steps towards a merger or acquisition.

An incorrect assessment of the assets and liabilities of the acquired company leads to a decrease in the synergistic effect.

For example, an example of a miscalculation might be an assumption of an underestimated level of costs associated with an increase in the production capacity of the acquired company or with the warranty obligations of a previously released defective product. In the case of a production merger by another acquiring company, an assessment is made of the impact that the acquired production has on environment. Most likely, all expenses for the elimination of negative polluting effects will be the responsibility of the buyer.

Often, an error in the calculation of the finances necessary for the implementation of integration is an obstacle to achieving the planned result of a merger or acquisition.

The miscalculation in future costs can be quite significant. Thus, the projected price of Rover was 800 million pounds, and in the end it cost BMW 3.5 billion.

Wrong steps in the way of the merger of companies have caused the failure of many mergers.

Managerial and leading personnel are not always able to cope with the problems that have appeared after the merger of companies. The individual nature of production, infrastructure and intra-corporate traditions, bookkeeping is often incompatible with similar areas of the integrated company.

The cost of many organizations is directly affected by the quality human resources, namely, the competence and degree of professionalism of all personnel - from top managers to ordinary workers.

Changes in the managerial staff change the criteria for assessing the work of personnel, planning career ladder employees, the policy of distribution of finances is changing. All this is reflected in the psychological mood of the team and can change both relationships within the company and informal ties. The situation when previously the owner of the company, who has a stake in the business, becomes an employee of the merger, negatively affects the working mood of a significant part of the staff and may even lead to the loss of significant personnel. The situation can only be saved by complete satisfaction with the new position of the former owner and the teamwork of the entire team according to a specially developed plan.

An analysis of the experience of mergers and acquisitions of many companies states the fact that it is often advantageous not to buy a company, but to sell it.

The receipt of the greatest benefits by the shareholders of the target companies in comparison with the profits of the owners of the firm-buyer is explained by two reasons:

• The acquiring company is often much larger than the target company. In this situation, when dividing the financial result of synergy, the owners of each company will get equal shares of income in monetary terms, but in percentage terms, the shares of the shareholders of the new company will be much smaller;
• turning the process of buying and selling an organization into an auction causes the offers to shareholders of the companies being bought to get better and better with each new buyer. Thus, the owners of the target company "pull" a larger share of the profits from the upcoming merger. An increase in the value of a company put up for sale may also be the result of anti-raider techniques.

The modern economy sometimes regards the merger of large companies (eg guilds) as a sub-optimization.

The meaning of this definition in the field of company restructuring is as follows. A strategy aimed at strengthening intra-corporate ties leads to the fact that purchase and sale transactions are made in "their" circle. But this does not prevent "their" organizations from setting the most favorable cost for themselves.

The effect of such mergers is either an unreasonably high price for the product of the newly founded enterprise, or the standard discussion of the cost turns into long clarifications of mutual claims. As a result, complex relationships within large guilds make it difficult, and sometimes impossible, to set prices that will satisfy companies on opposite sides of the system.

• Reasons for joining even competing companies into business alliances

Practitioner tells

Vitaly Vavilov, Project Manager, Strategy Partners, Moscow

Virtually the only way to create value during a period of financial instability in a country is through a merger, acquisition, or alliance. These measures, firstly, reduce the value of assets, and secondly, they join forces to speed up during the crisis.

A good example of this is the American medical company LHC Group, which doubled its value in just six months of the crisis thanks to the merger. The outsourcing scheme of work made it possible to increase the structure of the LHC Group by 8 joint ventures in 6 months, attracting medical institutions as partners. Guaranteed customer traffic minimized a potential drop in demand, and the resulting financial gain made it possible to acquire two companies that significantly expand the scope of services. Thus, during the general crisis, the LHC Group was able not only to maintain its positions, but also found a way for itself to invest in progressive development.

Choosing for yourself the path of various types of associations, the most important thing is to always see the final goal of each next step, which ultimately should result in the acquisition of additional benefits for each participant in the integration.

My personal observation is that vertical mergers are most successful. Here, the main task will be to select a like-minded company with the greatest competitiveness (for example, one that sells a well-recognized trademark or has another attractive offer) or one that operates in a dynamically developing industry. The success stories of Hana Electronics (an Asian electronics manufacturer) and Alaska Milk (a Filipino dairy manufacturer) are a great example of just such a strategy.

Overview of methods and tools

Alexander Molotnikov
Head of Department corporate governance
OAO FPK Slavyanka, Vladimir

With the development of market relations in Russia, domestic entrepreneurs faced the problem of expanding their business. At various time periods given task was solved in different ways: if in the early 90s the necessary assets, as a rule, were acquired in the process of privatization of state property, now preference is given to more complex methods and techniques. This article will discuss the most effective options for the acquisition of companies, as well as specific cases of their application.
Final goal any takeover - access to the assets of a particular enterprise. The target can be achieved different ways: both directly - to acquire ownership of the property of interest, and indirectly - to become the owner of a controlling stake in a company that has the specified property on its balance sheet.

Currently, the most widespread are three main options for the acquisition of companies:

Establishing control over the management of the enterprise or a person representing the interests of the owner of a large block of shares;
Acquisition of a controlling stake;
Bankruptcy of the company with the subsequent acquisition of its assets.
First way usually used in relation to state-owned (municipal) enterprises or to economic companies in which the state is the main shareholder. In this case, a third-party company simply bribes the managers of the enterprise, and also, in the case of a business company, a person representing the interests of the state at general meetings shareholders (as a rule, an official of the Ministry of Property Relations and regional property management committees). This method is very convenient when a third-party company is unable to either acquire a controlling stake (the state is not going to part with the shares of the company in the foreseeable future) or bankrupt the enterprise - hardly anyone will dare to challenge the federal or regional authorities. In addition, if the state nevertheless decides to sell its stake in the company or privatize the state-owned enterprise, a company that has an “informal” relationship with the management team of an economic entity will have a huge advantage in the struggle for the assets being sold. A significant disadvantage of this method is dependence on specific officials (in the event of a change in management or a person representing the interests of the state), as well as the lack of registration of ownership of property or company shares.

Sufficiently reliable protection against such a collusion between the management of the enterprise and third-party companies can be the annual replacement of persons representing the interests of the state at general meetings of shareholders, as well as representatives on the Board of Directors of the company (often these persons represent state interests for several years, which cannot but provoke so-called "informal contacts" with interested structures). An important detail is the careful selection of persons applying for the positions of heads of state (municipal) enterprises, the purpose of which is to prevent the appointment of persons associated with various kinds of vertically integrated companies, as well as other types of commercial organizations, to managerial positions.

Second way most effective in terms of legal guarantees for an expanding company. Indeed, if you legally competently conduct an operation to purchase shares of an economic entity, then you can not be afraid that interested parties will challenge your actions in the judiciary. In addition, the shareholder-owner of a controlling stake has the right to officially make decisions on almost all issues of the company's activities, i.e. feel like a full owner. This method is most often used in the course of friendly takeovers, when the company's shareholders agree to sell their shares to an outside investor.

However, the application of this method is significantly complicated by the high costs of acquiring the company's shares. The fact is that when determining the value of a controlling stake in even a medium-sized Russian enterprise, the account will go to millions of dollars, to say nothing of larger legal entities. In addition, the unwillingness of the owner of the controlling stake is likely to sell his business. In such a situation, you will have to look for non-standard ways to solve the problem.

It is known that the domestic practice of corporate governance has developed a wide range of methods for intercepting control in companies. In particular, if no single shareholder has a controlling stake (assuming that the largest shareholder controls only 40% of the voting shares), buybacks of shares from individuals are organized, as well as attempts are made to purchase shares from legal entities, which are usually reluctant to part with their securities. If shareholders do not want to sell their shares, they usually use one of the following methods:

· issuance of a power of attorney to represent the interests of a shareholder at general meetings of shareholders;
transfer of securities to trust management.
In the first case, the shareholder trusts to represent his interests to an individual or legal entity at general meetings of shareholders. In doing so, it must be taken into account that maximum term power of attorney - three years. Of course, in order to convince shareholders to issue powers of attorney, it is necessary to use various means (campaigning with the help of people respected at the enterprise, monetary incentives, articles in the local press).

As a way out of this situation, you can use the procedure of trust management. In this case, the shareholder (management founder) transfers his shares to trust management commercial organization or individual entrepreneur(manager). Such a transfer is formalized by a trust management agreement. It should be noted that the conclusion of an agreement is possible only if the manager has the appropriate license, because. the object of management will be securities. The contract in question is concluded for a period of not more than five years. Of course, the shareholder can refuse the contract, but then he will have to not only warn the manager three months before the termination of the contract, but also pay the latter a remuneration (thus, the initiator of the takeover is given time to adjust the line of conduct in the light of, for example, the mass termination of contracts trust management).

The third way. Of course, both the issuance of powers of attorney and the conclusion of trust management agreements do not provide a third party with full control over the assets of the enterprise. That is why it makes sense to apply the following scheme, which was successfully used in relation to OJSC X by company Y, which managed to accumulate more than 50% of the voting shares of a business entity. At the same time, the conclusion of trust management agreements, the receipt of powers of attorney, the acquisition of shares was carried out not by company Y, but by individuals controlled by it (moreover, the mentioned persons were not legally connected with company Y in any way).

· At the first stage, an extraordinary general meeting of shareholders of JSC X was held, during which a new Board of Directors of the company was elected. Result: more than half of the members of the Board of Directors (6 out of 11) are controlled by company Y. In addition, a new CEO was elected at this shareholder meeting, also representing the interests of company Y.
· At the second stage, after a significant strengthening of the position of the specified legal entity, direct work began with the property of the company. As you know, the general director can independently conclude transactions for the alienation of the company's property if its value does not exceed 10% of the book value of the assets. Consequently, the director who initiated the asset stripping faced a major hurdle, which was nevertheless overcome. According to the law "On Joint Stock Companies" and the Charter of JSC X, the decision on the company's participation in newly created commercial organizations is made by the Board of Directors by a simple majority of votes. With control over six of the eleven members of the Board of Directors, Company Y has no difficulty in pushing such a decision through this governing body. JSC X establishes JSC Z, the second founder of which is company Y, while JSC X receives 24% of the voting shares of the company being created (which is very important, because this is not even a blocking stake).
· It was assumed that OJSC X would transfer a significant part of its property (the most valuable real estate, equipment, etc.) to the authorized capital as payment for the shares. Due to the fact that the value of the transferred property amounted to 47% of the book value of the assets of OAO X, it was necessary to obtain the approval of the Board of Directors, and the decision had to be taken unanimously. Of course, members of the Board of Directors, representing the interests of another major shareholder, blocked such a decision. However, no one expected their support.
· Acting in accordance with the Law on Joint Stock Companies, the members of the Board of Directors controlled by company Y, by a majority of votes, decided to hold an extraordinary meeting of shareholders, which should have approved the said transaction (a simple majority of shareholders' votes was sufficient). Preparatory stage to the holding of the general meeting was the most difficult and responsible. The fact is that it was necessary to prevent the second major shareholder convince minority shareholders to terminate issued powers of attorney and concluded trust management agreements. Without going into details, we state that company Y managed to retain control over more than 50% of the voting shares of company X. Thus, the general meeting of shareholders approved the alienation of the property of JSC X, transferring the assets of interest to company Y under the control.
(In the case under consideration, the main thing is that when making a transaction for the alienation of property on the part of the management bodies of the company, there should be no interest in the transaction. That is why there should be no connection with company Y of the shareholders of the company, members of the Board of Directors, CEO. The fact is that the procedure for approving a transaction in respect of which there is an interest is much more complicated than the procedure for approving a major transaction).

· Subsequently, company Y, together with JSC Z, establishes JSC A (in this case, the already familiar share capital structure was established: company Y - 76% of the shares, JSC Z - 24%). As payment for the shares, OJSC Z transferred to the new business entity the same property previously owned by OJSC X.
· Thus, company Y, not owning a majority of the voting shares of OJSC X, placed under its control the most significant assets of the company, having carried out the entire operation legally competently and leaving no hope for its competitors to return the withdrawn assets.
After analyzing the above situation, we can single out the following mistakes of the “old” management bodies of JSC X, which led to a hostile takeover of the company’s assets:

· the shareholder owning 40% of the voting shares of the company did not increase his share in the share capital structure to 50% + 1 share, confidently believing that the existing shares are sufficient to maintain control over the enterprise;
when the purchase of the company's shares began, accompanied by the receipt of powers of attorney and the conclusion of trust management agreements, the specified shareholder and the management of the company controlled by him delayed the decision to buy back the shares, and also did not conduct a much-needed campaign to discredit outside investor in the eyes of ordinary shareholders (as a rule, it is easier for the current management to convince shareholders);
· The charter of JSC X did not provide for the possibility of making a decision on a major transaction by a qualified majority (3/4 votes), which would not allow third parties to alienate property.
It was these management miscalculations that allowed company Y to seize the property of JSC X and significantly reduce the financial and economic performance of the company.

No matter how attractive the above ways of acquiring companies are, we have to admit that they are not most often used by domestic entrepreneurs. The current reality is that more profitable to apply for bankruptcy in relation to the enterprise of interest, rather than to acquire its shares or carry out such an unreliable procedure as bribing management.

The main advantage of the bankruptcy of a commercial organization is the low costs of implementing such a model. Indeed, why buy shares of an enterprise, spending significant cash, if possible, by spending an order of magnitude smaller amounts, to obtain the necessary assets (of course, in this case, the costs will consist, as a rule, of the so-called "monetary subsidies" sent to officials of regional authorities, judges of arbitration courts, as well as arbitration managers). At the same time, this method is also used in the case when the owner of the controlling stake in the company does not intend to sell it to third parties.

The following bankruptcy scheme is most often used.

· A certain legal entity interested in acquiring the assets of a business company begins to systematically buy up the debts of this company. In this case, it is not necessary to pay for the purchase in full, installment payment is usually applied. It's no secret that finding an overdue debt even with a well-established enterprise is quite easy. What can we say about the bulk of economic entities.
· Having concentrated a significant amount of debt, a legal entity initiates the bankruptcy procedure of the enterprise, having previously “agreed” with the regional and (or) federal authorities (depending on the significance of the enterprise). The operation is calculated in such a way that the absorbed company is obviously unable to repay the existing debt, which results in the introduction of a monitoring procedure and the appointment of a temporary manager. The arbitration manager secretly represents the interests of the attacking legal entity and, under the guise of analyzing the financial condition of the debtor, establishes “bottlenecks” in the activities of the enterprise in order to aggravate the current situation, as well as prevent the company's management bodies from restoring the solvency of the enterprise. At the same time, the mass media begin to form a negative image of the economic society, leading to a decrease in the sale of manufactured products, and, consequently, to a deterioration in its financial position.
· As a result of such actions, external management is introduced at the enterprise, after which the head of the debtor is removed from office, and the powers of the governing bodies are terminated. All management functions are transferred to an external manager. It is from this moment that the long process of withdrawing the assets of the organization begins. In this case, an important role is assigned to the stage of bankruptcy proceedings, when the property of the debtor is sold in order to satisfy the requirements of creditors.
· However, it is possible not to bring the case to the last stage of bankruptcy. In the process external management the attacking legal entity may apply to the shareholders of the company with an offer to sell their shares. Thus, shareholders are faced with a choice: either to refuse and be left with nothing, or to sell shares and receive, albeit small, but money. Having accumulated more than 50%, and preferably more than 75% of the voting shares of the company, the legal entity begins to actively restore the solvency of the enterprise in order to terminate the bankruptcy proceedings.
If shareholders do not want to sell shares, the following methods can be applied:

exchange of debts for shares of a newly created company;
additional issue of the debtor's shares.
The first method is absolutely legal and finds full support from arbitration courts and other state bodies.

So, the external manager, exercising the powers of the debtor's management bodies, with the consent of the meeting of creditors, creates an open joint-stock company. The authorized capital of the new enterprise is formed at the expense of the debtor's assets cleared of debts. Creditors, on the other hand, accept shares of a new business entity as debt, thereby repaying their claims against the debtor (during this process, the main thing is to accumulate as much debt as possible, since the number of shares received depends on this, and hence control over assets ). It is important that the consent of the shareholders of the debtor is not required, because. a debt-for-equity swap is recognized as one of the possible conditions settlement agreement concluded at the stage of external management by the arbitration manager and creditors.

Persons using this scheme proceed from the fact that in the course of external management, all the powers of the company's management bodies (including the general meeting of shareholders) are transferred to the arbitration manager. Consequently, the manager may decide on an additional issue of the debtor's shares. The additional issue is carried out in such a way that the organizers of bankruptcy have a controlling stake in the company, which allows them, after the restoration of the company's solvency, to make any management decisions in relation to the company's assets.

Exist ways to counteract the initiation of bankruptcy of an enterprise:

Prevent the company from having overdue accounts payable;
Monitor the company's creditors by contacting Special attention for transactions with the company's debt;
· if there is indirect evidence of the beginning of the process of initiating bankruptcy proceedings, it is necessary at all costs to try to pay off the debt that has arisen;
· before initiating bankruptcy proceedings, start the process of asset withdrawal using multi-way schemes associated with the creation of subsidiaries, followed by the sale of their shares to individuals controlled by the management of the main company, but not legally connected with it;
· to try to convince the relevant state authorities that such bankruptcy is unprofitable for the economy of the corresponding subject of the federation, and possibly a certain industry.
Thus, it becomes obvious that the practice of corporate conflicts has developed a wide range of different methods of interception of control. Some of these techniques benefit both the initiator of the takeover, and the acquired company, and the region in which it is located. At the same time, the use of dishonest methods of corporate struggle, coupled with short-term goals, benefits only individual attacking companies, significantly destabilizing the social situation in a particular region.

Mergers and acquisitions or M&A (eng. mergers and acquisitions) is a term with a broad meaning. It is customary for them to designate transactions for the purchase or sale of businesses or companies. We will call such a business or company a goal or a target company, which is a tracing paper from the English target. Let's try to understand the definition of an M&A transaction in more detail. So, first of all, it's a deal. And like any deal, there are two sides to an M&A deal: the buyer and the seller.

Seller and Buyer

Who is the buyer and seller in M&A deals? To answer this question, let's first look at how big business is legally organized in general, in our example, Russian big business.

The ultimate owners of all companies are people ( individuals) whether they are small shareholders with a few shares or oligarchs with controlling or 100% stakes. They are often also referred to as ultimate beneficiaries or simply beneficiaries.

They usually own their property and assets through intermediate holding companies, which are most often registered in offshore jurisdictions such as Cyprus or the British Virgin Islands. Such companies are called holding companies, abbreviated as HoldCo, since their main function is to own shares of other companies, that is, to keep them on their balance sheet. English word Hold means to keep.

Intermediate holding companies are the owners of shares in parent holding companies, which can be registered both offshore and in Russia. Such holding companies are the main economic entities of the business. It is there that management is concentrated, and it is these companies that we usually mean when we simply say Severstal or Evraz.

The parent companies of the holdings, in turn, own shares in the company, which already directly own the assets and conduct operations, and are often referred to as operating companies or OpCos.

Such a step-by-step ownership scheme is called a chain of ownership or a chain of ownership. It is needed primarily for organizing business management, for tax optimization and for maintaining the confidentiality of the final beneficiaries. In large transactions, buyers and sellers are legal entities, i.e. companies that own shares in the company being sold (in the case of a seller) or will become their owners as a result of the transaction (in the case of a buyer).

Read also: The concept and features of corporate disputes

That is, if shares of a holding company are sold, then the seller is an intermediate offshore company. If shares of an operating company are being sold, then HoldCo is the seller, and if assets are being sold, then OpCo is the seller. So, when we say a seller or a buyer in the context of an M&A transaction, we mean both the buyer or seller directly, i.e. the holding or operating company, and the ultimate beneficiary.

Legally, of course, the company acts as a buyer or seller, but all decisions are made by the beneficiary. He, in the end, receives economic benefits from the transaction, therefore, most often we mean the beneficiary when we talk about the seller or buyer in essence, and not in the legal sense.

There may be one seller and buyer, or there may be several. For example, in the deal for the purchase of TNK-BP by Rosneft, there were several sellers: the British company BP and the AAR consortium, which represented the interests of several beneficiaries at once, Mikhail Fridman's Alfa group, Leonard Blavatnik's Acctss group and Viktor Vekselberg's Renova. And when buying the Dutch bank ABN AMRO, a consortium of three banks was formed: the British RBS, the Dutch FORTIS and the Spanish Santander.

Subject of the transaction

You have gained insight into sellers and buyers. What is the subject of an M&A deal? As already mentioned, M&A refers to the purchase of a company or business. What does it mean to buy a company or a business? There are two options, buying shares or buying the assets of the target company.

Large transactions most often take the form of buying and selling shares. When buying shares, the buyer transfers ownership of them and the corresponding corporate rights, such as the right to participate in the management of the company through the right to vote and the right to participate in the distribution of profits, i.e. to receive dividends.

At the same time, both all shares, i.e. 100%, and a minority stake of less than 50% or a majority stake of more than 50% can be purchased. If 100% of the shares are acquired, then the buyer receives full control over the management and distribution of profits of the target company. When buying less than 100% of the shares, the seller also remains a shareholder along with the buyer.

The main benefit for the state and owners is brought only by large, international companies and projects. The larger the company, the more profitable it is, which means that the expansion of a successful company is part of the standard development process. If you are an ambitious leader of the company, then you need to be ready to enter into M&A deals.

What is M&A and what are their features?

An M&A deal is one of the most popular types of business deals. The abbreviation stands for "mergers and acquisitions", which means merger and acquisition.

M&A is a set of tasks that are aimed at smoothly merging one company with another or several enterprises into one. Such transactions can be signed for a wide variety of purposes - in order to increase an existing company, open new branches in other cities or countries, it is better to optimize production. Most often, this helps to solve such a problem as a poor system for delivering the product to the consumer, for example, when increasing the volume of production of goods.

M&A are of several types:

• Horizontal. These types of mergers and acquisitions occur between businesses that produce the same products. This task is carried out in order to increase the volume of production and sale of goods in new territories. Often this task will be performed in order to “force out” regional competitors in the market, which may eventually develop into a larger firm. For example, a large chain of stores operates in several regions of Kyiv. They sell sporting goods, but to expand their business they buy a large store from another company. After that, the company changes the sign, introduces new work standards, rebrands and launches the same store with the same product (or complements the assortment own products). Thus, the company does not have to open from scratch, search for clients and search for its niche in the market.
• vertical. The process of acquisition and merger, in which firms with a similar field of activity, but not the same, participate. For example, a dairy company decides to buy a milk packaging plant. This will be beneficial for the firm, because it will not have to depend on deliveries and suppliers. In addition, it will be possible to reduce the cost of the final product, because the cost of goods will be less.
• Parallel. Absorption occurs between firms that are engaged in the same process in different places. For example, a coal mining company, as well as a related enterprise for its enrichment. This will also simplify the procedure as much as possible and will reduce the cost of the goods.
• conglomerates is a network of companies that deal with a wide variety of goods and services. Most of the time they are completely unrelated. Examples would be the organizations of Elon Musk or Richard Branson. In one firm, under the leadership of one person, there are several companies - charitable centers, marketing agencies, jet aircraft factories and more. This is very convenient, because in the event of the closure of one enterprise, the main company will not suffer significant losses, but will remain on the market.

How to avoid mistakes during M&A deals?

If you complete an M&A transaction without proper preparation or insufficient control over the process, then the merger can bring you great amount problems. To get the most benefit, small mistakes must be avoided.

1. Team reaction. Naturally, after buying another company, the manager may face a negative reaction from the team. They may not understand or accept new system management, and not support your firm's policies. Do not ignore the problem, because employees can do their job poorly, and you will notice the result only after a few months, when the losses exceed the income. Use different ways of communicating with the team - psychological approaches, retraining of specialists, and even dismissal of those who cannot do their job.
2. Understanding business fundamentals. The leaders of large companies today will not be able to fully function in the market without a minimum understanding of the business. And if you start making deals without this knowledge, this will lead to the fact that potential partners can make the contract more profitable for themselves.
3. The question of the purchased brand after the merger. Often one firm buys another, which is more popular and has a “loud” brand. Then you have to make a decision - leave it or replace it with your own. If you are doing a horizontal merger method, then it would be better to replace the company name with your own, and vice versa in a vertical one. In the second option, you were not competitors, and the area of ​​​​work of another enterprise is slightly different, so most likely it already has a certain reputation and regular customers.

An M&A deal is a great opportunity to expand your company, get partners and increase the scope of your business.

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 going through perhaps the most favorable period (at the moment the situation is worsening 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 self-interest 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 development national economy, as they destroy stability and confidence in the future, diverting resources to defense. 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 big deals this year - the completion of a deal to obtain control in Russneft (estimated $3.1 billion) and the acquisition of a minority stake in NOVATEK (estimated $2 billion).

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.

see also

Notes

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

Mergers and acquisitions

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Books

• Mergers, Acquisitions and Restructuring of Companies , Patrick Gohan , Quote`Partners continue to cooperate only as long as it brings mutual benefit.`Patrick A. GohanAbout what the bookThere are a large number of transactions around the world today. Growth… Category: Management and management Publisher: Alpina Publisher, Manufacturer: