Takeover and merger: examples. Mergers and acquisitions

Often for the structuring of companies used the methods of acquisitions and mergers. These are operations of an economic and legal nature, designed to unite several organizations into a single corporate structure. The owners of the new commercial unit are persons who have at their disposal a controlling stake. The purpose of the event is to increase capital efficiency.

What are the main pros and cons?

In an effort to improve their financial results, enterprises are trying to unite. Joint management significantly increases the efficiency of organizations. Mergers and acquisitions in Russia, as practice shows, provide an opportunity to adapt to a progressive system of the economy and gain additional privileges in the competition.

The benefits of combining are obvious:

• reduction of terms to achieve a positive effect;
• tax base optimization;
• geographical expansion of the business;
• gaining control over tangible intangible funds;
• acquisition of working capital directly at an earlier underestimated cost;
• instant purchase of a specific market sector.

There are some disadvantages:

• sufficiently high costs relating to the payment of forfeits;
• significant difficulties in the presence of companies in various industries;
• possible difficulties in interacting with new employees;
• in fact, the deal may not be very profitable.

Features of the ongoing processes

Ongoing acquisitions and mergers have their own specifics. With a voluntary business combination, a new legal entity has to be formed. If one enterprise joins another, then the main one retains its essence as a subject. All rights and obligations of subsidiaries pass to him.

Merger is the process of combining two or more legal entities on a voluntary basis. After completing all the documents, a new economic entity begins to function . Combination can take place in two scenarios.

1. Restructuring of companies is carried out with complete liquidation. An established enterprise acquires the assets and liabilities of the included organizations.
2. When merged, a partial transfer of the rights of existing entities on the rights of investment contribution is made. Participants in this case retain their administrative integrity.

A takeover is a process in which one company buys another. After registration, she begins to completely control her activities. At the same time, the dominant company acquires from 30 percent of the authorized capital of the second legal entity.

Classification of Association Procedures

The mergers and acquisitions that are completed can be divided according to various principles. The type of association is selected depending on the conditions established in the market environment, as well as on the potential opportunities that business companies have.

The table shows the main types of associations.

Mergers and acquisitions are also classified according to national-cultural characteristics. If the restructured organizations are located on the territory of one state, then they are considered national. Their activities do not go beyond the boundaries within which they conduct it. Transnational is an association of entities from various countries. Their number may be unlimited. Currently, multinational corporations are often found.

Fundamental Benefits

In order for the takeover and merger to be positive, several factors must be considered:

• determination of the optimal form of association;
• the speed of connecting to the process staff of middle and senior managers;
• the amount of proposed capital for integration;
• transaction procedure;
• selection of a key representative for future relationships.

During the operation, it is necessary from the very beginning to understand that obtaining a positive result when combining organizations should lead to an increase in profit. At the whole stage of the restructuring, the mistakes made should be eliminated on time. The ultimate goal is not only the presence of a synergistic effect, but maintaining it for a long time.

Preparation for the merger and acquisition process

At the initial stage, the main tasks are set and ways to solve them are determined. It is necessary to understand whether the goals set can be achieved by alternative methods. For this, it is necessary to carry out procedures to increase internal potential, develop suitable marketing strategies and other measures that can bring it closer to the planned result.

After that, a search is made for a suitable company to combine. Preparation for the transaction directly takes place in three stages.

1. The field of activity of the enterprise is studied: the dynamics of growth, the possible distribution of potential, the impact of external factors are evaluated. The first thing to consider is actual assets and liabilities.
2. We analyze our own capabilities. In any case, the company must conduct an unbiased self-assessment. Using the data obtained, you can understand what criteria should be followed when choosing an organization.
3. Possible competitors are being investigated. You can feel all the positive aspects of unification if you carefully study the potential of rivals. Having evaluated them, it is easier to determine the strategic direction.

Analysis of the effectiveness of the transaction

It is believed that a business combination will be a tremendous success if a company from a market sector that is progressively developing is selected as an opponent. However, this approach is not correct. The final assessment of mergers and acquisitions is based on various studies:

• analysis of the balance of income and expenditure operations;
• identification of the benefits of integration for all parties;
• accounting features of the association;
• identification of the main problems in the field of tax base, personnel and legal restrictions.

Possible negative points

Transformations with economic structures can have not only a positive, but also a negative effect. Studies have shown completely different results. Analysts concluded that negative points arise for a number of reasons related to each other:

• erroneous assessment of the capabilities of the merged company;
• misuse of financial resources necessary for integration;
• illiterate steps at the stage of combining.

Practical application

In a period of economic instability in the state, the best way out of the situation is to create an alliance. Such measures will help reduce the value of assets and combine efforts to survive during a crisis. There are many examples of mergers and acquisitions, but the option with the American company LHC Group deserves special attention.

The presented organization managed to double its own value within six months. And this is in the conditions of the financial crisis. Using an outsourcing scheme made it possible to increase the structure by 8 economic units in just six months. Won financial gain made it possible to significantly expand the scope of services. The company managed to find opportunities for progressive development by investing funds, despite negative external factors.

In conclusion

In the Russian market of mergers and acquisitions, the total amount of transactions decreased by an average of 29 percent. This is due to a decrease in the volume of operations. The share of the Russian Federation in the world market amounted to approximately 1.3 percent. Over the past decade, such low rates have not been observed. As for foreign investment, their volume increased by 40 percent.