Potential Acquisitions and Mergers – Possible Consequences

Mergers, potential acquisitions, joint ventures, or other forms of acquisition of control, including intertwining of directorates, whether of a horizontal, vertical, or conglomerate nature.

Important About the Processes of Potential Acquisitions and Mergers

The post-crisis and current stages of development of the M&A market are characterized by vertical and horizontal transactions in the global fuel and energy complex, as well as horizontal transactions in the field of telecommunications and Internet technologies. Many experts believe that the development of the mergers and acquisitions market will be carried out mainly through the consolidation of small and medium-sized enterprises.

Mergers and acquisitions are activities aimed at joint production and economic activities of two or more companies, with the creation of a new managing body, in order to increase profits by reducing the number of duplicating functions of employees, saving costs and the cost of procurement for the maintenance of the apparatus of employees of several companies, as well as increasing the production potential, these transactions are abbreviated as M&A transactions:

  1. Mergers and acquisitions are a set of measures aimed at combining two or more companies into one corporation with a single governing body, which is accompanied by the transfer of business management control from one company to another.
  2. Mergers and acquisitions are a special type of investment based on the principles of voluntary consent of all participants in the process and mutual benefit.
  3. Such a phenomenon as mergers and acquisitions arose as a result of the application of world experience in corporate management in the field of company restructuring.

The Most Important Consequences of the Potential Mergers

Wanting to stay afloat or expand the scope of their company, many managers decide to reorganize the business through mergers and acquisitions. Association of the company with another legal entity. face allows you to get a number of advantages, which will be discussed in this article. The strategic goals of the company’s investment activity are specific fixed desired parameters of its strategic position, allowing it to conduct activities in the long term and evaluate the results of the success of its implementation.

The potential merger offer is a deal between the managers of the acquiring company and the shareholders of the target company to buy back the shares of the latter. In this case, the managers of the target company do not take part in the negotiation process. Thus, the main difference between a merger and an intercompany tender offer is that in a merger, the right to accept an offer to buy a company belongs to the managers of the target company, and in an intercompany tender offer, to shareholders.

Depending on the nature of the potential in the classification of potential mergers, such subspecies can be distinguished as:

  • industrial mergers, when the production potential of companies is combined in order to increase the scale of production due to the synergy effect;
  • purely financial mergers are an association in which companies do not function as a single entity, but there is a centralization of financial policy.

A potential merger and acquisitions are a combination of companies from the same industry and the same direction. As a rule, these are competing companies. The purpose of such mergers is to reduce costs by increasing the scale of production, reducing duplicating functions, reducing overall costs, better and fuller use of production capacities and resources. But sometimes such mergers are carried out in order to destroy competitors.

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