International mergers and acquisitions are one of today’s key features of globalization of economic development. Multibillion-dollar agreements entered into by multinational corporations for the purchase and sale of individual companies or parts of businesses have become commonplace not only in developed countries but also around the world. In this article, we will show you how to link up companies at post-merger integration state.
Companies at Post-Integration Stage
Companies at the post-merger integration stage affect the interests of the general population working in the acquired enterprises, as well as public authorities and management, which build relationships with multinational corporations on compliance with domestic law, taxes, environmental protection, etc. Thus, the study problems of international mergers and acquisitions (M&A) are very relevant for domestic scientists and practitioners.
Although the experience of virtual data rooms has more than a century of history, not all problems that arise in these processes are clear and have clear solutions. The vast majority of managers of multinational corporations consider themselves experts in this field. However, the statistics of mergers and acquisitions look quite strict. Only a third of agreements in this area can be considered successful.
The mechanics of mergers require a different type of skill: you have to take into account many factors that managers usually do not face. Many unfamiliar third-party players are involved in the process of concluding the agreement: bankers, lawyers, consultants. Recent publications, for example, make it clear that investment bankers are often encouraged to enter into a deal, even when it becomes apparent that the decision is impractical.
The law, designed to carry out a kind of natural selection of more efficient enterprises, has turned into an instrument of aggressive and criminal redistribution of property. The paradox of the situation is that it is often viable enterprises with solid industrial potential, albeit experiencing temporary financial difficulties, that are subject to bankruptcy proceedings. Basically, the mechanism of accelerated redistribution of the property was used to alienate it from the state.
The Way of Linking Up Companies
The implementation of virtual data room has identified a number of characteristic features of the corporate market:
- prevalence of joint-stock ownership (mainly open type);
- high dispersion of the main part of the share capital between small shareholders (individuals);
- the concentration of most of the capital in the hands of insiders (management, members of the labor collective);
- keeping a significant amount of packages in the hands of the state.
In the early stages of the formation of a market economy, the strategic approach to the selection of an acquisition or integration target, which implies the use of sound criteria for making decisions in this area, was almost never used by Russian companies. The absence of a strict need to form a conscious strategic approach to mergers and acquisitions was due to a number of factors:
- the takeover companies did not take on significant risks corresponding to the real value of the assets, since fully paid deals were the exception rather than the rule;
- enterprises were acquired with “guaranteed cash flows” or were significantly underestimated;
- gaining control over the enterprise, the new owners did not set the task of developing it, increasing management efficiency and increasing the value of the company, and often were engaged in the withdrawal of assets, including abroad;
- the expansion was often carried out for non-economic reasons.