The mergers and acquisitions market acted as a mechanism that increased the imbalances in the global economy during the upswing, and during the crisis, the M&A market acted as a mechanism that smoothed out these very imbalances. Take a look at m&a process overview below.
How to Perform M&A Process in Big and Small Companies?
In the foreign practice of corporate governance, a merger is understood as the merger of several legal entities, as a result of which only one company remains, and the rest cease their activities. According to the norms of domestic legislation, such processes fall under the term “attachment”. This term implies that one or more legal entities terminate their activities, while all rights and obligations are transferred to one legal entity, on the basis of which the unification processes take place and to which they join.
The merger of the largest banks leads to significant effects. The mentioned processes are usually not the most profitable, besides, it is more difficult to reorganize management after the merger. The positive results of the merger do not appear immediately, which is caused by the huge one-time costs of the merger procedure itself, and these costs increase in the financial sector of rapidly growing structures. According to experts, about 70% of large bank mergers and acquisitions initially led to a decrease in return on invested capital.
Mergers and acquisitions should be distinguished from other forms of company integration. First of all, this applies to corporate alliances, which is an association of two or more firms that affects only a specific business sector or a separate project, for example, in the field of product sales, research, and development, production, or technological development of companies. At the same time, the founders of the alliance retain full legal and economic independence. The same firm can be a member of several strategic alliances
Business Entities and the M&A Transactions Overview
Depending on the behavioral sign, M&A transactions are divided into friendly and hostile. In a friendly merger or acquisition, the top managers and shareholders of both the initiating and target companies approve the transaction and agree to carry it out:
- In this case, in order to develop a rational solution, cooperation is more acceptable than confrontation.
- The phrase “hostile takeover” implies the establishment of control over the target company against the will of the management of this enterprise.
- In foreign practice, a takeover also implies the purchase of a controlling stake in a company’s voting shares without any agreement with the company’s shareholders and managers.
It is obvious that for different banks the level of integration while performing the M&A processes, its complexity, and the impact on the formation of the strategy are different. In order to develop an integration plan, one should understand which structures and elements will be involved in this process and to what extent, how easily they can be integrated. Throughout the integration, it is important for structural divisions and various banking technologies to provide support and constantly monitor how the reorganization processes in the merged bank are practically going.
Besides, in the transition of the country to a M&A process, enterprises must receive capitalization estimates, which together will make up the capitalization of the national economy as a whole. Increasing the capitalization of the economy is one of the key goals in the program of the country’s socio-economic development.