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Mergers and Acquisitions (M&A)

Mergers and acquisitions (M&A) are a economic processes of consolidation of business and capital, occurring at macro- and microeconomic levels, as a result of which larger companies appear on the market.

Merger is the union of two or more business entities, resulting in the formation of a new economic unit. It is a business combination in which one of the merging companies (the main one) continues to operate, while the others lose their independence and cease to exist as legal entities. All rights and obligations of the affiliated companies pass to the main company.

Acquisition is a transaction made in order to establish 100% control of the main company over the economic company and carried out by acquiring more than 30% of the authorized capital (shares, etc.) of the absorbed company with the subsequent merger of the absorbed company with the main company.

Classification of the main types of mergers and acquisitions

Depending on the nature of the merger, the following types of mergers are distinguished:

Geographically, mergers can be divided into:

Depending on the attitude of the management staff of the companies to the merger or acquisition transaction, the following transactions can be distinguished:

By nationality, we can distinguish transactions:

Motives for deals

Since the late 1980s, Richard Roll’s “hubris theory” has become widely known, according to which the acquisitions of companies are often explained by the actions of customers who are convinced that all their actions are correct and prudence is impeccable. As a result, they pay too high a price to achieve their goals.

The theory of agent costs focuses on the conflict of interests of shareholders and managers, which, of course, exists not only in mergers and acquisitions. The presence of their own interests may give rise to special motivation for mergers and acquisitions from the management, which contradict the interests of shareholders and are not related to economic feasibility.

There are the main motives for mergers and acquisitions:

Absorption can be used by a large company in order to supplement its range of goods offered, as an alternative more effective in comparison with the organization of a new business – that is, by acquiring a ready-made enterprise instead of organizing a new enterprise.

The largest mergers and acquisitions