The largest mergers and acquisitions in the world. Acquisitions and mergers of companies. Search for the right corporation based on motivational criteria

On August 9, the Turkish brewing company Efes entered into an agreement to merge businesses in the Russian Federation and Ukraine with the world's largest Belgian AB InBev. Deal at the end of 2018.

Major merger deals are in the RBC review.

In the late 1990s, after the German telecommunications company Mannesmann entered the British market, it was absorbed by the local giant Vodafone Airtouch PLC. Vodafone's first offer was made in November 1999, and the deal was closed in February 2000. The company formed as a result of the merger had more than 42 million customers, and its value was estimated at $342 billion. In 2017, Vodafone took 419th place in the Forbes ranking of the largest public companies with a capitalization of more than $67 billion.

In January 2000, the world's largest media conglomerate, Time Warner, and the world's largest Internet company, AOL, announced a merger. The deal at that time was valued at $164 billion. A year later, when the deal received approval from the US Federal Communications Agency, its value amounted to $111 billion. In the late 1990s, AOL showed annual profits of $1.2 billion, Time Warner - more than $1.9 billion When the dot-com bubble burst in the early 2000s, AOL's assets began to rapidly lose value. In 2002, AOL Time Warner was forced to record a record loss in the history of American companies - $99 billion. At the end of 2009, Time Warner and AOL separated again. The deal is considered one of the worst in the industry.

In 2017, Time Warner ranked 153rd in the Forbes ranking of the largest public companies with a capitalization of more than $76 billion.

In October 2016, the world's largest brewer, Anheuser-Busch InBev, absorbed its competitor SABMiller in a deal worth $106 billion. Negotiations on the merger lasted about a year. Analysts noted that after the deal, AB InBev could overtake a giant like Coca-Cola in terms of revenue.

In 2017, InBev took 126th place in the ranking of the largest public companies according to Forbes with a capitalization of more than $213 billion.

Photo: Robin van Lonkhuijsen/Reuters

In October 2007, after a long standoff with Barclays, a consortium of banks led by Royal Bank of Scotland (RBS) received consent to a deal to acquire the Dutch bank ABN Amro. The acquisition almost proved fatal for RBS, as it was on the brink of collapse in 2008 during the financial crisis. Then the bank was nationalized and recapitalized, and after the crisis, RBS reduced its foreign assets, including trading operations in the United States. He also left Russia.

In February 2000, the American pharmaceutical companies Pfizer and Warner-Lambert announced a merger in a deal worth $90 billion. Before the deal, Pfizer showed annual profits of $3.4 billion, Warner-Lambert - $1.7 billion. As a result of the merger, the largest pharmaceutical company was formed US market and one of the largest in the world. When the deal was approved by the US Federal Trade Commission in June, Pfizer had to divest four drugs to avoid monopolizing the market. In 2017, Pfizer took 47th place in the ranking of the largest public companies according to Forbes with a capitalization of more than $203 billion.

In December 2006, the American telecommunications giant AT&T closed a deal to acquire BellSouth, a telephone operator in the southeastern United States. After the acquisition, the number of subscribers of the corporation increased to 70 million people. The regulator approved the deal after AT&T promised to support “net neutrality” for high-speed Internet platforms for two years. The market reacted positively to the news of the completion of the transaction: AT&T shares rose 0.7% after trading closed. In 2017, AT&T took 11th place in the ranking of the largest public companies according to Forbes with a capitalization of more than $249 billion.

In 1998, amid falling world oil prices, American oil companies Exxon and Mobil signed a merger agreement. The deal, which resulted in the formation of the ExxonMobil corporation, was closed in November 1999, its amount was about $81 billion. In order for the deal to be approved by the regulator, the companies pledged to sell more than 2.4 thousand gas stations throughout the country. The deal reunited the two parts that had been separated in 1911 by a Standard Oil court order.

In 2017, ExxonMobil took 13th place in the ranking of the largest public companies according to Forbes with a capitalization of more than $343 billion.

Sir Richard Sykes, Chairman of Glaxo Wellcome and Member of the Board of Directors of Smithkline Beecham

In January 2000, pharmaceutical company Glaxo Wellcome agreed to acquire rival SmithKline in a stock swap worth $75.7 billion. The deal took place in December 2000 after being approved by a British court.

Sanford Well, chief of Travelers group and John Reed, chief of Citicorp after a press conference at which the merger was announced

In April 1998, financial services companies Travelers Group and Citicorp announced plans to merge to create the world's largest financial services company, Citigroup. The transaction amount was estimated at $70 billion. The new company received 100 million clients, and profits were expected at $7.5 billion per year. Ten years later, the deal was criticized during the financial and economic crisis.

In 2017, Citigroup took 12th place in the ranking of the largest public companies according to Forbes with a capitalization of more than $164 billion.

In September 2016, the American computer equipment manufacturer Dell acquired the storage system manufacturer EMC. The deal became the largest in this sector of the economy. With revenues of about $74 billion, the resulting Dell Technologies was expected to become the largest privately held IT company in the United States.

In June 2000, the merger of Bell Atlantic and GTE telephone companies was approved. The new company changed its name to Verizon Communications and became the largest in the US market. In 2017, the company took 18th place in the ranking of the largest public companies according to Forbes with a capitalization of more than $198 billion.

Acquisitions and mergers are often used to structure companies. These are operations of an economic and legal nature designed to unite several organizations into a single corporate structure. The owners of the new business unit are those who have a controlling stake. The purpose of the event is to improve capital efficiency.

What are the main pros and cons?

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

The advantages of the merger are obvious:

• reducing the time required to achieve a positive effect;
• optimization of the tax base;
• geographic expansion of business;
• gaining control over tangible intangible assets;
• acquisition of working capital directly at a previously reduced cost;
• instant purchase of a specific market sector.

There are also some disadvantages:

• quite large costs related to payment of penalties;
• significant difficulties when there are companies in different industries;
• possible difficulties when interacting with new employees;
• in reality, the deal may not be very profitable.

Features of ongoing processes

The ongoing acquisitions and mergers have their own specifics. In case of a voluntary merger of companies, a new legal entity must be formed. If one enterprise joins another, then the main one retains its essence as a subject. All rights and obligations of subsidiaries are transferred to it.

Merger is the process of combining two or more legal entities on a voluntary basis. After all the documents have been completed, the new one begins to function. The combination can take place according to two scenarios.

1. Restructuring of companies is carried out with complete liquidation. The resulting enterprise acquires the assets and liabilities of the incorporated entities.
2. When merging, the rights of existing entities are partially transferred as investment contributions. In this case, the participants retain administrative and economic integrity.

A company takeover refers to the process in which one company buys out another. After registration, she begins to fully control its activities. In this case, the dominant company acquires at least 30 percent of the authorized capital of the second legal entity.

Classification of merging procedures

Conducted mergers and acquisitions 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 joins.

	Peculiarities
Horizontal	During the process, organizations engaged in the same activities or having a similar technical and technological structure are integrated.
Vertical	Connecting enterprises directly in different industries. This is done to control the previous stages of the production process.
Conglomerate	The operation of combining enterprises in different industries, while they do not have any technological or production similarity.
	Companies developing the same product are merging. For example, a combination of enterprises for the production of mobile devices and software can be carried out.

Also, mergers and acquisitions are classified according to national and cultural characteristics. If the organizations being restructured 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 them. Transnational is an association of entities from different countries. Their number can be unlimited. Multinational corporations are common these days.

Fundamental points of positive effect

In order for acquisitions and mergers to be positive, it is necessary to take into account some factors:

• determining the optimal form of association;
• speed of connecting middle and senior staff to the process;
• the amount of expected capital for integration;
• procedure for conducting a transaction;
• selection of the main representative for future relations.

During the operation, it is necessary to understand from the very beginning that obtaining a positive result when combining organizations should lead to increased profits. At the entire stage of restructuring, mistakes made should be corrected in a timely manner. The ultimate goal is not only to have a synergistic effect, but to maintain it for a long time.

Preparing for the M&A 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. To do this, it is necessary to carry out procedures to increase internal potential, develop suitable marketing strategies and other measures that can bring them closer to the planned result.

After this, a search for a suitable company to merge is carried out. Preparation directly for the transaction takes place in three stages.

1. The field of activity of the enterprise is studied: growth dynamics, possible distribution of potential, and the impact of external factors are assessed. The first step is to look at actual assets and liabilities.
2. Own capabilities are analyzed. In any case, the company must make an unbiased self-assessment. Using the data obtained, you can understand what criteria should be used when choosing an organization.
3. Possible competitors are being investigated. You can feel all the positive aspects of the merger if you carefully study the potential of your rivals. By assessing them, it is easier to determine the strategic direction.

Analysis of the effectiveness of the completed transaction

There is an opinion that a merger of companies will be a great success if a company from a market sector that is progressively developing is chosen as an opponent. However, this approach is not correct. The final assessment of mergers and acquisitions is made based on various studies:

• analysis of the balance of incoming and outgoing transactions;
• determining the benefits of integration for all parties;
• taking into account the specifics of the association;
• identifying the main problems in the field of tax base, personnel and legal restrictions.

Possible negative aspects

Transformations with economic structures can have not only positive, but also negative effects. The studies conducted show completely different results. Analysts came to the conclusion that negative aspects arise for a number of reasons related to each other:

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

Application in practice

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

The presented organization managed to double its value within six months. And this is in a financial crisis. The use of an outsourcing scheme made it possible to increase the structure by 8 economic units in just six months. The financial benefits won 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.

As a conclusion

On the Russian mergers and acquisitions market, the total amount of transactions completed decreased by an average of 29 percent. This is due to a decrease in the volume of operations performed. The Russian Federation's share in the world market was approximately 1.3 percent. Over the past ten years, such low rates have not been observed. As for foreign investment, its volume increased by 40 percent.

The current system of production, trade and consumption is based primarily on large national and international companies. Giant corporations produce between 65 and 75 percent of global GDP. The slogan “more is more profitable” applies not only to the purchase of household chemicals, but also to business, so the size of a company is inextricably linked to its profitability, sustainability and efficiency. It is known that it is profitable to purchase raw materials in large quantities, and international business giants are not subject to political crises in individual countries. Developing your company to a global scale is the goal of every visionary and ambitious leader.

There are different ways to expand companies, and one of them is a merger and acquisition transaction or, as it is also called, M&A.

What is an M&A transaction? In English, this abbreviation stands for mergers and acquisitions, which is literally translated as mergers and acquisitions. This is a set of measures aimed at integrating one company into another, merging them or merging a number of companies. The goals of such operations can be different - expansion of the company, acquisition of new retail space, optimization of production, in particular by improving the supply system of raw materials and delivery of the final product to the consumer.

There are several types of mergers and acquisitions:

• Horizontal. Such mergers and acquisitions are carried out between companies producing the same product in order to expand the scale of production and distribution. It is believed that this is done to destroy competitors, but this is not entirely true. Rather, such acquisitions provide additional opportunities and expand the sphere of influence. Thus, a large chain can buy already operating stores with the same assortment (shoes, phones, groceries), change the sign, rebrand and continue to provide customers with the same services, but under their own brand. This is beneficial in that the company is not looking for new clients, is not trying to find a niche in an already crowded market, but “buys” a client along with a competitor.
• Vertical. These transactions are designed to make the production and supply process more profitable and controllable for the manufacturer of the goods. For example, a clothing company acquires factories for the production of fabrics, accessories, sewing machines, stores to sell its goods and a forwarding company to deliver them. Thus, the corporation becomes independent, independent of suppliers and transport companies. The raw materials themselves are also cheaper due to the absence of markups, and the cost of the product is reduced.
• Conglomerates. They combine companies with different types of goods and services that are not related to each other. For example, this could be a canned fish factory, a courier service or a metallurgical enterprise. Such a partnership is convenient because it helps one of the partners stay afloat in the event of temporary difficulties associated with loss of interest in the product being manufactured or a crisis in a particular industry.
• Parallel mergers. Produced between enterprises producing goods that form part of the same process or related goods. For example, coal mining and processing enterprises.

Why are mergers and acquisitions necessary?

As you have already noticed, the priority goals of mergers and acquisitions may vary depending on their type. But in general terms they are present in all cases of M&A transactions.

First of all, any acquiring or merging company strives to synergy effect- more efficient work due to mutual reinforcement. This effect can be demonstrated using the formula 1+1=3. Thus, after a merger, two companies can significantly reduce management costs by eliminating identical positions and combining some departments into one. In addition, all companies in a conglomeration can learn from each other's best practices: for example, one has developed a more efficient accounting system, another has developed logistics, and a third has developed human resources. By bringing together all the most successful developments and implementing them in post-merger management, you can achieve accelerated profit growth and optimize your work as much as possible. It is also beneficial during a merger to combine different resources that new enterprises bring with them - raw materials, specialists, a ready-made brand, technology. In addition, as the company grows larger, it becomes more competitive and stronger.

Stages of an M&A transaction

1. First, you need to assess the attractiveness of the deal itself - will it bring benefits or will the acquired object become dead weight? At this stage, is the company ready to integrate with another business entity? Will this cooperation be successful for all parties? Sometimes a decision on a merger or acquisition is necessary to save the company - here you also need to analyze whether the chosen method of overcoming the crisis is what the company needs. There is a lot to consider on both sides of both a merger and an acquisition. Buying a competitor always incurs additional financial and organizational costs, and the weaker acquired party is on the verge of big changes - a change in management, changes in processes, loss of independence. At this stage, the company is assessed and a verdict is made on the advisability of a merger or acquisition designed to increase the value of the final object.
2. After the decision is made, the search for partners begins, the buyer looks for a target for takeover, and candidates for the merger of two companies are selected. Now we need to analyze the compatibility of the two future components of one whole, the possibility of their quick and painless integration. An assessment is made of the prospects for joint development, an analysis of the sales market, the names and quality of manufactured goods, and the possibility of the necessary reorganization.
3. The third stage is a more in-depth continuation of the second. When a target is selected, a thorough analysis of all assets is carried out, the costs of acquiring and integrating the object, and the estimated value of the company after consolidation are calculated.
4. Next, the negotiation stage begins. There are two ways to take over the selected company. The first, the fastest and most convenient for everyone, is negotiations, the logical conclusion of which is the conclusion of a deal. If the target company does not want to enter into consolidation, then the acquirer begins to buy up the shares and assets of the target in order to use them as leverage for further influence on the owners of the company. When concluding any deal, it is important to think through all the details in advance, especially if the negotiations take place on neutral territory: take care of reliable transport and a comfortable meeting room. When planning a partnership, every little detail matters.
5. When the deal has taken place, all that remains is to officially announce the merger and begin the integration process. Its duration and complexity depend on how different the initial indicators are, and what result management plans to achieve: complete, partial or minimal integration.

How to avoid making mistakes when expanding a corporation?

There are always risks in mergers and acquisitions that arise from a lack of specificity in the buyer's goals and unpreparedness for some inevitable processes.

1. Human factor. The acquirer will definitely face a reaction from the team of the acquired company - some specialists may leave, others will not want to support the policy of the new management. It is necessary to decide in advance whether the new owner is ready for the loss of employees, whether he will take the necessary measures to minimize the negative consequences. Or personnel is one of the acquired resources and they need to be retained with the help of an increase in position, salary, and career prospects.
2. Understanding the business. In the modern business world, conglomerations of the same type or similar types of companies are most common. And for good reason - in order to effectively manage a constructor from companies acquired at different times, you need to be able to competently implement them into the outline of your own business. And for this it is necessary to deeply and in detail understand all the intricacies of the work of a particular enterprise. When purchasing a new property, it is important to thoroughly know how it functions.
3. Should I keep the brand? This decision is of great importance, since full integration into its structure of a company with a well-established brand and long history may lead to a not entirely expected result - after all, part of the purchase price was formed precisely due to the popularity of the brand. Stripping an integrated company of its name is sometimes the same as throwing assets in the trash.
4. What exactly is expected from an acquisition or merger? Each specific company is acquired not just for the purpose of expansion, but for the purpose of expansion in a certain direction. There can be a lot of options - increasing retail space, using new equipment, technologies, patents, personnel, trademarks. A company is bought for one or two points; it cannot bring everything with it at once. But it will take over the missing qualities from the acquiring company. Whether this acquisition is cost-effective, whether it is capable of giving the buyer the desired result, is decided in the process of preliminary analysis.
5. To prevent the chicken from eating the fox. You need to clearly understand which company is leading. It happens that the acquired company is stronger in terms of personnel and technology, but has fallen on hard times due to incompetent management or unscrupulous financing. Having received the necessary supply, the introduced company can appear on top and crush the absorber. To prevent this from happening, it is necessary to track the potential of the target and carry out a series of reorganizations aimed at mutual strengthening, and not just at strengthening the absorbed object.

M&A transactions are a good opportunity to expand the corporation through existing structures, take advantage of the useful developments of purchased competitors and strengthen your business. This is a difficult process that requires in-depth analysis and careful preparation. With proper planning and implementation of the entire range of events, a merger or acquisition will become a favorable opportunity for the further growth and prosperity of the company.

Nowadays, small entrepreneurs cannot compete with large, well-known companies. This requires resources, and all resources belong to industrial giants. Of course, some are lucky with an idea or start-up capital, and they break into a large market, but what should ordinary entrepreneurs do? An excellent way out of this situation is M&A transactions for mergers and acquisitions of companies. This is a simple and effective way to increase resources, capital and the number of consumers.

New classification of M&A transactions

M&A (mergers and acquisitions) - actions to merge businesses and absorb some companies by others. Despite the name, M&A transactions can be divided into three groups:

The procedure for merging several businesses into one

Merger is the combination of many companies, as a result of which a new legal entity is formed. Such an action can be characterized as follows: “All firms must suffer a loss in order to gain an advantage as a single group.” In turn, this type of transactions is divided into subtypes:

• merger of forms - a merger during which independent companies cease to exist, and the created legal entity receives all the assets, rights and obligations of the merged companies;
• merger of assets - an association in which participating companies transfer exclusive rights to a new legal entity and continue their activities.

Reorganization of commercial enterprises in the form of merger

Merger is also a merger of companies. But unlike a merger, a new economic unit is not formed. The main company, receiving all the rights and obligations of the affiliated companies, continues its activities, and the others cease to exist. Simply put, the target firms must suffer damages in order for the acquiring corporation to gain the full benefits.

Measures to take over one company by another

A takeover is the process of establishing complete control over a company. The takeover is carried out by purchasing a third of the shares, shares - the authorized capital. In other words, an acquisition differs from an incorporation in that the target firms continue to exist.

Authorized capital is property that is the minimum necessary for organizing the activities of a business company, formed from the contributions of the founders (participants) of the company and serving as a guarantee of the interests of its creditors.

Http://dic.academic.ru/dic.nsf/enc_law/2332/%D0%A3%D0%A1%D0%A2%D0%90%D0%92%D0%9D%D0%AB%D0%99

The sequence of M&A transactions over the past two decades has been worked out to the smallest detail, so there is no need to “reinvent the wheel”

The essence of M&A transactions between organizations

Mergers and acquisitions are classified according to a number of their features. Various classification criteria allow us to describe each transaction in detail and evaluate its possible consequences empirically.

By the nature of the connection of companies

The simplest classification that allows you to describe the procedure for merging businesses is described in almost all textbooks. In this case, transactions are described as:

• horizontal - connections of companies of the same type of activity. Produced to gain the ability to compete with large enterprises, for example, to increase capital;
• vertical - connecting many companies with different activities. For example, one company is a manufacturer, and the other is a transporter. Most often used to reduce costs;
• parallel (or generic) - connections of companies with related products. This could be a combination of a smartphone manufacturer and an operating system for them. This improves product quality and reduces costs at the production stage;
• conglomerate - connections of companies that are not connected by any relationships. This type of association is not used very often, because the benefits depend on certain situations.

By location of owners or economic entities

The division based on geography seems quite reasonable and logical. In this case, it is customary to distinguish transactions as:

• local;
• regional;
• national;
• international;
• transnational.

According to the intentions of stakeholders

It is logical for companies to be guided by motivational criteria in relation to the transaction. Then actions can be divided into friendly and hostile.

According to economic and political characteristics

In the case of M&A transactions between large companies or multinational corporations, political and economic intentions are difficult to separate. According to this criterion, such transactions are usually classified as:

• connections occurring within one country are internal;
• export - associations with the transfer of rights to foreign companies;
• import - connections with obtaining rights of companies from other countries;
• mixed transformations.

Video: Law school - types and tasks of M&A

Consequences of restructurings using the M&A model

Merging companies is a controversial process. What will happen after a merger or acquisition is simply impossible to predict. There are many options, but they, of course, can be divided into “pros and cons”.

Positive consequences of transformation

There are a lot of advantages of M&A, but they are quite difficult to achieve and they are not all available at once. More often than not, favorable outcomes improve the new company's ability to compete. In addition, other business concentration goals are achieved:

• the most obvious result is an increase in capital;
• entering a larger market, for example, an international one;
• the emergence of an established product sales system;
• reducing the cost of goods.

And also, due to the emergence of a large corporation, people will pay attention to you, which means you will have a chance to increase the number of regular consumers.

What are the most common disadvantages of making transactions?

Business transformation in most cases is accompanied by a number of problems. Even if there are no fundamental disagreements between the companies, there may be opposition from the personnel of the companies that took part in the merger, misunderstanding of the situation by some counterparties, or deliberate sabotage of the procedure by local line managers. In addition, the disadvantages of transactions include:

• high costs of acquiring a company;
• risks when choosing a target company;
• possible problems with suppliers;
• the need to renegotiate most business contracts;
• difficulties in bringing office work to a single standard;
• possible incompatibility of company cultures on religious, national or any other basis.

Tax consequences of acquiring companies: how to absorb or merge businesses without harm to yourself

Company owners must understand that during an M&A they may face not only the need to pay off all obligations of the acquired or acquired company, but also face increased attention from regulatory authorities. Based on this, before deciding to initiate a transaction, you should assess the target company’s debts to budgetary, government and non-profit institutions as accurately as possible. To do this, an inventory of accounts payable and tax obligations is carried out.

Video: lecture on services for support and regulation of M&A transactions

The procedure for conducting transactions: theory and practice

Mergers and acquisitions are profitable processes, but very complex. Even taking into account the choice of a good strategy, most companies fail to successfully complete the merger. In order for everything to work out, you should devote time and attention to each of the points listed below.

The question of a successful strategy

If you choose M&A rather than systematic development, you should carefully consider your entire strategy. If the strategy is not close to ideal, force majeure can destroy the whole idea. Assess the advantages and disadvantages of your company and, based on this, choose where, how, when and with whom you will merge.

Selection of accounting and legal personnel

To implement the merger, the active participation of many employees will be required: manager, accountant, lawyer, personnel officer, advertiser. If you are going to regularly use M&A, you definitely need a qualified team. The presence of cool professionals in it will speed up the process and reduce the likelihood of unforeseen situations.

Rules for setting goals for a manager

It is important to want something specific, real and achievable in the foreseeable time. The end result should increase your advantages in the market and eliminate existing shortcomings. Current issues should be resolved based on the ultimate goal, not immediate benefits.

Determining the fundamental requirements for the counterparty

Having established the main goals, determine the main qualities or features of the companies participating in the association that will help achieve the desired result. Many managers do not address this obvious point properly. This is especially common among Russian entrepreneurs who begin the M&A procedure not out of a sober calculation, but based on short-term gain. Such actions immediately lead to a disastrous result.

Search for the right corporation based on motivational criteria

Negotiations are one of the most important events, which must be approached with maximum responsibility. The search company and the target company exchange information about each other, having previously determined the information that needs to be known and can be told. This stage is important in order to understand whether the company is suitable for the chosen goals and strategies.

Analysis and evaluation of the selected company

Consulting companies consider a thorough study of a company to be a very important step due to the many potential problems that can arise during it. Evaluate everything: finances, traditions, possible difficulties in legal, environmental, cultural terms. It is always easier to find a new goal for unification than to deal with problematic situations.

Actions to conclude an agreement

Having decided on the price and form (merger or acquisition), you can carry out the legal formalization of the transaction. But first, the merger of corporations must be agreed upon with the relevant government authority. In Russia, large transactions undergo mandatory approval by the Antimonopoly Committee.

Step-by-step instructions for combining a business

Real unification is one of the most important stages. After the formal merger, the company cannot yet operate to its full potential. To do this, you need to actually merge the companies. Namely, it is necessary to recruit competent employees, organize a system for generating ideas and solving problems, and coordinate the activities of individual employees, departments and departments. If you take this point carelessly, negative consequences of M&A may appear.

Hostile Takeover Protection

Since hostile takeovers exist, the question arises: “How can you protect your company from takeover?” This question is not new, so there is a whole list of techniques against invading corporations. Illegal methods will not be listed here, but every entrepreneur should know about the permitted methods of protecting property.

Countering the illegal takeover of a company or attempts to liquidate it

In theory, it is necessary to merge businesses only with the full consent of all parties involved, but in practice the general procedure for conducting transactions is often violated. Often, business owners receive notification of a company merger at a time when raiders are already in charge of their office.

In order to agree to a transaction of your own free will, and not by order, it would be useful to study techniques for countering business takeover, which are relevant for any industry:

• selling to shareholders only those rights that can be used in special situations. In this case, the absorber will not have sufficient power over the target;
• protective absorption. The target company itself can absorb a certain number of companies, thereby increasing its value;
• repurchase of the required number of shares;
• destruction of some advantages because of which the invader chose this target company. For example, the sale of an asset;
• introducing some amendments to the company's charter that will scare away corporate invaders;
• lawsuits.

Examples of the largest mergers and acquisitions

M&A is often used by industrial giants, and in such situations the world economy shudders noticeably. Such mergers remain forever in history. Here are some of the biggest M&A deals in recent years.

Table: major capital mergers 2000–2004

Year	Acquirer	Acquired	Transaction value, $ billion
2000	Merger: America Online Inc. (AOL)	Time Warner	164.747
2000	Glaxo Wellcome	Smith Kline Beecham	75.961
2004	Royal Dutch Petroleum Co.	Shell Transport & Trading Co	74.559
2006	AT&T Inc	BellSouth Corporation	72.671
2001	Comcast Corporation	AT&T Broadband & Internet Svcs	72.041
2004	Sanofi-Synthelabo SA	Aventis SA	60.243
2002	Pfizer	Pharmacia Corporation	59.515
2004	JP Morgan Chase & C	Bank One Corp	58.761
2009	Panasonic	Sanyo Electric Co	6,4

How does Russian experience differ from foreign experience?

The M&A market in Russia is growing day by day. Only in the second quarter of 2016 it increased almost 2 times and reached $2.9 billion. It is interesting that the sale of Russian assets increased almost 7 times, and transactions for the acquisition of foreign assets by our businessmen began to take place several times less often.

The predictably unsuccessful result is explained not only by negative trends in the Russian economy, but also by the lack of a competent M&A strategy. Transactions are carried out without a clear plan, some of them have the sole purpose of withdrawing assets from the country, so they a priori cannot be successful. Experts believe that the Russian Government should take a close look at this area of ​​the economy, since there is a high risk of losing dominance in some industries, for example, automotive and tourism.

Video: in which sectors of the Russian economy does M&A occur most often?

M&A is one of the engines of the economy; it is useful for everyone: both producers (more resources) and consumers (higher quality goods at a lower price). Concluding mergers and acquisitions is not buying a lottery ticket, but long-term hard work. Of course, unification is difficult and sometimes dangerous, but knowledge will help you in this difficult task. Use the information wisely and reach new heights!

Over three quarters, the volume of M&A transactions involving Russian companies became the highest since 2013. However, without the deal to sell a stake in Rosneft, the result would have been the opposite. Experts expect real growth in the future

Photo: Sergey Karpukhin / Reuters

The total volume of mergers and acquisitions (M&A), including announced but unfinished ones, involving Russian companies both within Russia and abroad in the three quarters of 2017 increased by 43% compared to the same period in 2016, according to a new report from Thomson Reuters - Deal making in Russia 3Q 2017 (available to RBC).

For the nine months of this year, the total amount of transactions amounted to $18.2 billion compared to $12.8 billion in 2016. In 2015, 2014 and 2013, this figure was $10.3 billion, $16.3 billion and $38.2 billion, respectively. Thus, over the three quarters of this year, the market showed its best result since 2013. The fuel, energy and raw materials sectors account for 86% of the total M&A market in Russia, the report notes.

Stabilization without development

However, such a significant growth in the M&A market with the participation of Russian companies is not systemic, according to Thomson Reuters data. The rise was due to one announced deal for the purchase of Rosneft shares worth $9.1 billion by the Chinese oil company CEFC China Energy (Huaxin). Without this deal, thanks to which the market doubled, it would have shown the worst result for three quarters since 2005 (data for earlier periods is not included in the report).

In fact, this deal determined the leaders among investment banks for three quarters. In first place in terms of transaction volume is VTB Capital; as a consulting bank, the company conducted eight transactions in nine months for a total amount of $11.4 billion (60.9% of all transactions by value), including the transaction between CEFC and Rosneft. . Second place with the same deal ($9.1 billion, or 48.6%) was taken by the Chinese bank China International Capital. In third place with one transaction worth $1.85 billion (9.9%) is Deutsche Bank (it accompanied the transaction for the purchase of a stake in Severneftegazprom OJSC and a share in the development of the Yuzhno-Russkoye gas condensate field by the Austrian company OMV). The remaining investment banks had a share of less than 10% in the volume of transactions.

It was the deal with Rosneft that determined a 35 percent increase (compared to the same period in 2016) in the segment of acquisitions of Russian assets by foreign investors - up to $13.9 billion, the maximum since 2012. As for mergers and acquisitions of foreign assets by Russian companies and transactions between Russian companies within the country, the M&A market is showing the worst results over the past few years. The amount of transactions for the takeover of foreign companies by Russian ones in the nine months of 2017 decreased by 8​4.7%, to $413 million, reaching a minimum since 2001. The volume of mergers and acquisitions within the country showed a minimum since 2004, amounting to $4.3 billion.

The fact that in general, without taking into account the Rosneft deal, the M&A market with the participation of Russian companies is stagnating, is indicated by the number of transactions. Based on the results of three quarters of 2017, their number decreased to 993 from 1,265 in 2016.

Most Russian companies currently have no plans to expand their activities - on the contrary, the economy is now in a period of “stabilization without development,” and companies are cutting costs and cutting costs, says Evgeniy Nadorshin, chief economist at PF Capital. “The emphasis on stabilizing the economy from the authorities and the business that followed has suppressed the market for M&A transactions. Many people prefer to wait until the economy moves from stabilization to development again,” he says. The observed activity is rather of an inertial nature - transactions that were considered earlier are being carried out, the expert adds.

Despite the fact that in general the volume of M&A transactions shows a positive result compared to previous years, the market itself is not actually improving fundamentally - the transactions being carried out are not the result of the interest of new international investors, but the “daily work” of those who already know the market and have been in it for many years investors, says EY partner Ruben Israelyan. “There is no interest from new financial and strategic investors from the West; there are transactions, but they are local and without a serious competitive environment around,” he explains. The expert notes that there is interest from Japanese and Korean investors, but they are very cautious. In turn, although China is very active, concluding deals with Chinese investors takes a lot of time, Israelyan concludes.

Nadezhda Zhivora, head of PwC’s M&A practice in Russia and the CIS, shares the same opinion about the interest of foreign investors. “Many have decided to leave the Russian market completely, and those that are still operating in Russia, until recently, carried out selective, targeted transactions,” she explains.

Is growth possible?

Despite the gloomy investor sentiment, there is still potential for growth. “Asian investors (China, Korea, Indonesia, Kazakhstan) are looking at Russia more closely this year compared to 2015-2016, American and European investors are beginning to gradually return to Russia and look for assets to buy, within Russia there is a trend of IT consolidation medium-sized companies around banking and telecommunications groups, banks are showing particular interest in the fintech industry,” Nadezhda Zhivora points out. “We also expect a continuation of the trend towards increased activity on the part of foreign investors, associated with the relative cheapness of Russian assets at present.”

Experts interviewed by RBC point to another specific driver of growth in the M&A market - the Banking Sector Consolidation Fund (FBS), created by the Central Bank. Problematic banks are sent there for rehabilitation, the Central Bank enters into their capital, sanitizes them, and then plans to sell them.

The Central Bank announced the reorganization of FC Otkritie on August 29, and B&N Bank - September 21. These are the first banks that are being sanitized under a new mechanism, using the FCBS managed by the Bank of Russia, which is financed from the regulator’s funds. If the Central Bank estimates the size of the hole in FC Otkritie at 250-400 billion rubles, then for additional formation of B&N Bank reserves According to the regulator, 250-350 billion rubles are needed. Last week, the head of the Central Bank Elvira Nabiullina , that after the recovery of Otkritie and B&N Bank these banks will most likely be sold through a public offering.​

“The most interesting assets now automatically become banks sanitized by the Central Bank, which will hit the market within a certain period, and although this is not the prospect of 2018, this is now the main intrigue of Russian M&A,” says First Deputy Chairman of the Board of Sovcombank Sergei Khotimsky. “FCBS will inevitably continue to receive new banks for resolution, since there are many weak players in the sector that have systemic or regional significance,” he explains. These targets will ultimately become tasty morsels for stronger competitors who have the means to purchase them after recovery and ideas for their further development, he believes.

PwC also believes that the launch of FCBS will affect the demand for investment banking services to support transactions in the medium term. “When the fund fulfills the function of improving the banking system and focuses on selling assets to private investors,” says Nadezhda Zhivora.

However, some bankers are already noticing a slight increase in activity. “The mergers and acquisitions market has already seen an increase in demand for M&A services due to the launch of a consolidation fund. Market participants began to more carefully assess risks in the course of possible transactions,” says Kirill Nifontov, a member of the board of directors of Expobank. “In general, we expect both this and next year to increase the number of transactions and the volume of the M&A market itself,” the banker concludes.