Absorption and merger: examples. M & A transactions

Often, companies are structuredmethods of acquisitions and mergers. These are economic and legal operations designed to unite several organizations into a single corporate structure. The owners of a new business unit are those who have a controlling interest in their possession. The purpose of the event is to improve the efficiency of capital.

What are the main advantages and disadvantages?

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

The advantages of the unification are obvious:

• reducing the time to achieve a positive effect;
• optimization of the tax base;
• geographical expansion of business;
• gaining control over tangible intangible assets;
• Acquisition of working capital directly from the previously understated value;
• instant purchase of a certain market sector.

There are some disadvantages:

• sufficiently large costs related to payment of penalties;
• significant difficulties in the presence of companies in different industries;
• Possible difficulties in dealing with new employees;
• in fact, the transaction may not be very profitable.

Features of ongoing processes

Ongoing mergers and acquisitionshave their own specifics. When a voluntary association of companies has to form a new legal entity. If one enterprise joins another, then the main one retains its essence of the subject. All rights and obligations of subsidiary companies pass to it.

A merger is the process of combining two andmore legal entities on a voluntary basis. After the registration of all documents, a new economic entity begins to function. Combination can take place in two scenarios.

1. The restructuring of companies is carried out with complete liquidation. The educated enterprise acquires the assets and liabilities of the included organizations.
2. When merged, a partial transfer of the rights of existing entities is made as an investment deposit. Participants in this case retain their administrative and economic integrity.

Under the absorption of the company is understood the process,which one company makes a ransom of another. After registration, she begins to fully control its activities. In this case, the dominant firm acquires from 30 percent of the charter capital of the second legal entity.

Classification of merger procedures

Mergers and acquisitions can be madebe divided according to different principles. The type of association is chosen depending on the conditions established in the market environment, as well as on the potential opportunities that are available to economic companies.

The table shows the main types of associations.

Mergers and acquisitions are also classified bynational and cultural features. If the restructured organizations are located in the territory of one state, then they are considered to be national. Their activities do not go beyond the boundaries within which they conduct it. Transnational is the union of entities from different countries. Their number can be unlimited. At present, multinational corporations are often found.

The fundamental moments of the positive effect

To absorb and merge a positive nature, it is necessary to take into account some factors:

• the definition of the optimal form of association;
• speed of connection to the process of staff of middle and senior level;
• the amount of expected capital for the implementation of integration;
• the order of the transaction;
• choice of the main representative for future relations.

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

Preparation for the merger and acquisition process

At the initial stage, the main tasks are set andthe ways of their solution are determined. It is required 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 capacity, develop suitable marketing strategies and other measures that can bring it closer to the planned result.

After that, you search for the right company to join. Preparing for the transaction directly takes place in three stages.

1. The scope of the enterprise's activity is studied: the dynamics of growth, the possible distribution of potential, the impact of external factors. First of all, the real assets and liabilities are considered.
2. Our own possibilities are analyzed. In any case, the company must make an unbiased self-assessment. Using the received data, it is possible to understand, what criteria should be guided at a choice of the organization.
3. Possible competitors are being investigated. Feel all the positive aspects of the union can be, if you carefully explore the potential of rivals. After assessing them, it is easier to determine the strategic direction.

Analysis of the effectiveness of the transaction

There is an opinion that the merger will beto have grandiose success if as an opponent a company from the market sphere is chosen which progressively develops. However, this approach is not correct. The final evaluation of mergers and acquisitions is based on various studies:

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

Possible negative aspects

Transformations with economic structures canhave not only a positive, but also a negative effect. The conducted studies show absolutely different results. Analysts came to the conclusion that negative moments arise for a number of reasons, related to each other:

• erroneous assessment of the possibilities of the company to be merged;
• misuse of financial resources necessary for integration;
• illiterate steps at the stage of overlap.

Application in practice

During the period of economic instability inthe best way out of the situation is to create an alliance. Such measures will help to reduce the value of assets and join forces to survive during the crisis. Examples of mergers and acquisitions are many, but the option with the American company LHC Group deserves special attention.

Represented organization for six monthsmanaged to increase its own cost by half. And this is in the conditions of the financial crisis. Using the outsourcing scheme allowed to increase the structure by 8 economic units in just six months. The financial gain won made it possible to significantly expand the sphere of services. The company has managed to find opportunities for progressive development by investing funds, despite the negative external factors.

As a conclusion

In the Russian market of mergers and acquisitions, the totalthe amount of transactions made 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 was approximately 1.3 percent. Over the last decade, such low rates were not observed. As for foreign investments, their volume increased by 40 percent.