What are mergers and acquisitions and why are they done?

Mergers and acquisitions are an important instrument of corporate restructuring and influence economic processes to varying degrees. The article examines a number of major mergers and acquisitions that have taken place worldwide and in Russia. By analyzing these transactions, we can assess the role they play in the reallocation of resources and the creation of new development opportunities.

The biggest mergers and acquisitions that changed the business world

Offers that you will not soon forget.

AT&T’s acquisition of Time Warner: a major breakthrough in the media sector

In 2018, AT&T completed the acquisition of Time Warner, creating a new giant in the world of media and telecommunications. Mergers and acquisitions of this magnitude change not only the market, but also the principles of content consumption. This law allowed AT&T to offer integrated services that combined content production and distribution, thus gaining a significant competitive position. Moreover, it accelerated changes in the media sector, forcing competitors to revise their strategies and look for new ways to reach their audiences.

Google’s Motorola Mobility Acquisition Fails

Mergers and acquisitions always involve risks. In 2012, Google acquired Motorola Mobility for $12.5 billion. The goal of the deal was to strengthen Android through closer collaboration in the mobile device space and expanded patent rights. But not everything went according to plan: two years later, Google sold Motorola to Lenovo. This example clearly shows that even giants can achieve unpredictable results. The history of mergers and acquisitions is full of examples of situations where high expectations collide with harsh market reality. Sometimes this led to the most unexpected consequences.

Successful acquisitions and divestitures: who wins and who loses?

Let’s take a look at some deals that have made headlines around the world.

Microsoft’s acquisition of LinkedIn: an example of tactical expansion

In 2016, Microsoft acquired LinkedIn for a whopping $26.2 billion. Often, these types of mergers and acquisitions are carried out strategically with the aim of increasing influence in important market segments. Microsoft saw LinkedIn as an opportunity to strengthen its ecosystem of business and professional services. By integrating a professional social network into its platform, Microsoft gained access to a significant business audience and a wealth of data, significantly strengthening its position in the B2B sector. This is a clear example of how the right integration of assets can open up new opportunities and significantly increase competitiveness in the market.

Exxon-Mobil merger: dreams of dominance

When Exxon and Mobil decided to join forces in 1999, they created an energy giant with all the resources and capabilities to become a leading player on the world stage. Transformations of this magnitude rarely go smoothly, and the Exxon-Mobil merger was no exception. Overcoming numerous legal and organizational obstacles was only the beginning of a long journey. But despite all the difficulties, the outcome was positive. The new energy giant was able to shape the market conditions and secure the beginning of a new energy era by setting the course for the coming decades.

How mergers and acquisitions are changing the business landscape in Russia

The Russian Federation is also a country where notable mergers have become a permanent part of its history.

Acquisition of VimpelCom and Tele2: a merger that benefits consumers

In 2013, one of the most notable mergers in the Russian telecommunications market took place: VimpelCom and Tele2 decided to join forces. This transaction was of great importance because it allowed both companies to strengthen their position in the Russian market and offer more advantageous tariff plans. This improved the quality of communication and reduced the cost of service. The synergies created by the merger have significantly strengthened the position of the companies in the face of fierce competition from other major players. This is a great example of how local solutions can have a great impact on the market and the consumer. They improve the level of service and provide competitive advantages.

Merger of Sberbank and Yandex.Market: an evolutionary path

Mergers and acquisitions in Russia are generally no less ambitious than in the West. In 2020, Sberbank and Yandex.Market announced their partnership, creating the country’s largest e-commerce platform. This move allowed both companies to strengthen their positions and create a symbiosis of technological and financial capabilities, which is especially important in competition with global players. The impact of mergers and acquisitions on the market is always felt differently. This example shows how strong internal alliances can increase resilience to external challenges.

The most spectacular and revolutionary mergers and acquisitions in world history

In the end, we are left with more memorable experiences in global practice.

Facebook’s acquisition of WhatsApp: a commitment to social media

In 2014, Facebook acquired WhatsApp for a staggering $19 billion, making it one of the largest deals in the tech world. Such large-scale mergers and acquisitions often raise questions about their viability, but in the case of WhatsApp, it was a long-term strategy. Facebook was trying to conquer the instant messaging market and integrate its own services with WhatsApp to strengthen its dominant position in the social communications space. Thanks to this act, Facebook was able to expand its audience and create a unified communications ecosystem, which led to a huge increase in users and advertising revenue.

The Disney-Pixar merger: a story of synergy that changed an industry

One of the most important transactions in history was Disney’s acquisition of Pixar in 2006. Mergers and acquisitions between these giants are always considered risky, but this particular case marked the beginning of a true revolution in the animation industry. Disney, which had struggled to create high-quality animation content, was able to breathe new life into its studio by introducing Pixar’s unique creative approach. And Pixar gained access to enormous resources and marketing opportunities. How are mergers and acquisitions changing the business world? This case is a clear example of how synergies can lead to a qualitative leap forward in an entire sector.

Conclusion

Involvement is the engine of change in the modern world. It helps companies grow, launch new projects and shape a new business landscape, creating new opportunities and new challenges. Mergers and acquisitions always involve courage, risk and great potential. The future of the economy depends on those who are willing to take risks and change the rules of the game to move forward.

Mergers and acquisitions (M&A) are not just about buying shares and assets of a company. It is a complex and multifaceted process involving legal, financial and strategic aspects. In Russia, processes require a specific approach, taking into account legal nuances and the specifics of the market. Understanding how such transactions work and knowing the key stages of M&A can help you not only minimize risks, but also achieve the greatest possible benefits.

What is an M&A transaction: definition, stages and basic concepts

Mergers and acquisitions are transactions in which one company acquires another or two companies merge into one. In practice, this can mean the acquisition of one organization by another or the merger of two equal market participants. It is important to note that such agreements can pursue different goals: from expanding market position and increasing market share to integrating new technologies or capabilities.

The various stages of a merger and acquisition transaction include a wide range of activities, all of which are important for the successful completion of the process. It is a series of preparatory, analytical and legal steps that help the parties to ensure that the choice is right and the agreement is secure.

Stages of mergers and acquisitions in Russia: from preparation to completion

The preparation stage of a merger and acquisition transaction is one of the most important, as it is at this stage that the foundation is laid. This chapter covers the main issues related to identifying potential companies for mergers or acquisitions, analyzing financial statements and assets, and assembling a team of professionals to conduct negotiations and draw up an agreement:

1. Analysis of assets and liabilities. Before a merger or acquisition, an in-depth analysis of the assets and liabilities of both companies is carried out. This may include assessing ownership rights, valuation of assets and debts.
2. Assessment of the company’s potential. This involves drawing up a strategic business plan to determine how a merger or acquisition will improve the company’s market position. Includes an analysis of the company’s internal and external environment, competitiveness, market trends and the general economic situation.
3. Initial negotiations and determination of contract terms. After analyzing the data, the negotiation process begins. During this process, the contract terms, costs and other important points are determined.

Legal support for mergers and acquisitions

At this stage, it is important to ensure the legal certainty of the agreement and to ensure that all necessary conditions are met to avoid possible legal consequences in the future.

Legal support includes:

1. Checking the legal integrity of assets: analysis of intellectual property rights, assessment of contractual obligations and examination of relationships with important counterparties.
2. Preparation and signing of documents. At this stage, all necessary legal documents are drawn up, such as contracts, agreements and licenses confirming the transfer of rights and obligations.
3. Cartel control. An important part of legal support is testing the transaction against competition law. This is especially important for large orders that can affect competition in the market.
4. Tax planning. Develop a strategy that minimizes tax risks for both parties.

Financial side: analysis and evaluation

The financial side of a merger and acquisition transaction is also an important phase that requires careful attention. Valuing the company and raising funds from external investors are important phases in the merger and acquisition process:

1. Valuation of assets and companies. The transaction process involves determining the value of the company and its most valuable assets. This is usually done using valuation methods such as comparative analyses, valuations based on future income streams or using the discounted cash flow method (DCF).
2. Obtaining external financing. If additional financial resources are required for the transaction, investors or credit institutions are attracted at this stage. It is important that the conditions for raising funds are clear and understandable to both parties. This can have a significant impact on the terms of the transaction.
3. Development of the financial structure of the transaction. This phase determines which part of the transaction will be financed with equity and which part with debt. This can be either external financing or the issue of new shares or bonds. Key features of mergers and acquisitions in Russia

Mergers and acquisitions in the Russian market entail specific risks and tax peculiarities that must be taken into account at each stage of the transaction. The peculiarities include various tax nuances and risks associated with legal uncertainty, administrative control and competition law:

1. Legal instability. There may be changes in existing legislation, which creates additional risks for the parties to the transaction. It is especially important to take into account changes in antimonopoly legislation that may affect the possibility of concluding a deal.
2. Taxes and duties. When transferring assets between companies, tax consequences must be taken into account. It is important to develop a strategy in advance to minimize tax risks and ensure that transactions comply with all applicable regulations.
3. Risk of financial loss. If assets are incorrectly valued or important information is missing during the due diligence phase, the transaction may be loss-making.

How an M&A Transaction Works: Step-by-Step Guide

To avoid mistakes and unforeseen situations, the individual stages of an M&A transaction must be structured precisely:

1. Initiating a transaction. The buyer or seller shows interest in the transaction, collects preliminary data and starts searching for a company that could be the subject of the transaction.
2. Negotiating. At this stage, offers are exchanged, the terms of the transaction are worked out and preliminary agreements are drawn up.
3. Duty of care. One of the most important stages of the transaction is a thorough evaluation of the financial, legal and other important aspects of the company.
4. Concluding agreements. All agreements, contracts and legal documents are signed by the parties and set out the terms of the transaction.
5. Closing the deal. The final stage involves the transfer of assets and the completion of the transaction. This may involve a share exchange, transfer of ownership of assets, etc.

Conclusion

Mergers and acquisitions in Russia are a complex process where it is important to complete all important stages without errors. A good understanding of each step, attention to legal and financial details, as well as proper preparation and compliance with all legal nuances will allow you to minimize risks and achieve success.