Major mergers and acquisitions with global impact

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.

Mergers and acquisitions (M&A) are among the most complex and multifaceted aspects of corporate financing. The success of such transactions depends not only on strategic and operational decisions, but also on a carefully constructed financing system. Incorrect source selection or underestimation of risks can jeopardize even carefully drafted contracts.

Merger and acquisition financing is a complex and multifaceted process that can include both traditional bank loans and alternative capital lines. It is not just about raising funds, but about a whole system of strategic decisions where every decision can affect the stability and development of the company in the long term.

M&A financing stages: how to ensure success from start to finish

It is important not only to choose the right sources of capital, but also to consider many factors at each stage: from assessing the value of the company to choosing the optimal financing model.

1. Drafting an agreement: important aspects for a successful start

One of the most important tasks in the preparation phase is to analyze the risks that may arise during the transaction, including possible tax consequences, legal requirements and external economic factors.

It is necessary to determine how much capital is needed to fulfill the agreement. In this step, data on financial needs are collected and analyzed, for example, to determine the value of the company or the assets to be acquired. In this context, financing mergers and acquisitions can depend on both external factors and the internal needs of the organization.

The preparation of the advisory team that will accompany the transaction plays an important role. Lawyers, financial analysts, corporate account managers and other specialists will help you select the right financing instruments. In addition, advisors conduct a detailed analysis of current market conditions and future expectations, which influences the selection of the safest and most profitable sources of investment.

2. Company valuation: how to correctly determine the value of a transaction

An important stage that affects subsequent decisions. After all, the value of a company is not just a number on paper; it is a reflection of the country’s competitiveness, liquidity and growth prospects. The process of business valuation involves several methods, each with its own characteristics and applicability, depending on the type of agreement and market conditions:

1. The Discounted Cash Flow (DCF) method estimates the value of a company based on the future cash flows that the company can generate. The method is useful for long-term capital-intensive transactions, as it allows a more accurate prediction of the company’s future financial position.
2. Comparative analysis, where the value of a company is determined by comparing it with other similar companies in the market. This technique is particularly suitable when sufficient data is available to carry out such studies.
3. The asset-based valuation method mainly looks at the value of all the assets of a company, including real estate, equipment and intellectual property. This approach is generally used for simpler contracts, such as mergers of companies active in manufacturing.

Merger and Acquisition Financing Sources: Which One to Choose to Close a Successful Deal?

Once the business valuation is complete, it is time to select a financing source. Not only the cost of the contract is important, but also its design and the risks associated with its execution. Merger and acquisition financing sources can range from traditional bank loans to private investments:

1. Bank loans. They can be short-term or long-term and are usually used in cases where a deal needs to be closed quickly. Banks apply different conditions, such as interest rates, terms and required collateral.
2. Private investors and venture capital: suitable for start-ups or companies with high growth potential. Private investors can also be strategic partners and offer significant added value through their knowledge and networks.
3. Bond issuance is a suitable method for large companies that want to raise large amounts of capital, but do not want to take on debt in the form of bank loans. Bond issuance enables long-term financing without too much dependence on traditional lenders.
4. Loans from institutional investors: In recent years, pension funds and insurers have become increasingly interested, as they can offer financing on more favourable terms than traditional credit institutions.

Political and economic challenges

Financing mergers and acquisitions in Russia is challenging due to political and economic instability. Changes in legislation and uncertainty and instability in financial markets can have a major impact on the choice of capital sources and the design of contracts. Sanctions and restrictions are forcing many companies to adopt new approaches and adapt their financing strategies.

Changes in tax policy can therefore affect the attractiveness of the agreements and reduce their profitability. In addition, global economic changes, such as inflation and exchange rate fluctuations, can affect interest rates and borrowing costs. In an unstable economic environment, it is difficult to predict how financing standards will change, increasing the risks for transaction participants.

Conclusion

Financing mergers and acquisitions is a complex, multi-stage process that requires careful approach and comprehensive preparation. For successful contract execution, it is important to consider all potential sources of capital and their interaction with the transaction objectives. Each decision must be justified not only from a financial point of view, but also taking into account risks, legal requirements and the general market situation.

In order to successfully conclude contracts, it is important to pay attention to each stage: from preparing and assessing the agreement to finding sources of financing and signing the contracts. Only such an integrated approach guarantees favorable conditions for all parties involved.