In a modern market economy, every company needs to adapt to changes in the environment in order to achieve its main goals: making a profit and maximizing capitalization.
The Main Advantages and Disadvantages of Mergers and Acquisition
The market has a number of mergers and acquisitions advantages and disadvantages. The main advantages are:
- Operational and financial synergies.
- Possibility of business restructuring or exit from it.
- Withdrawing capital from a depressed industry.
- Creation of additional value.
- Establishing effective management.
- Combining strategy, mission, and goals.
The disadvantages are the following:
- High costs.
- Employee protests.
- Differences in organizational structure and technical support, duplication of services and products.
- Market monopolization.
- Difficulties in integrating mission, strategy, goal.
- Systematic risk.
In conclusion, let us note the following problems in the development of the domestic M&A market. First, despite the significant growth in the volume and value of transactions, there is no stagnation in the real sector of the economy. As a consequence, there is an increase in asset prices in the absence of real prerequisites for this. Secondly, the degree of the state’s presence as an active participant in the market is increasing, while its main function is regulatory. Third, the share of the industry is unevenly distributed. More than half of the market volume falls on the fuel and energy complex, which can be associated with the orientation of the raw material of our economy. The main problems of the economy are institutional in nature: poor development of market institutions, the judicial system, lack of transparency in property rights, corruption, and a lack of professional intermediaries.
Horizontal and Vertical Mergers and Acquisitions
Access to objects in the system is delimited individually for each storage element. Access rights can be assigned either by granting certain privileges or by assigning access rights directly to the storage object. Direct management of access rights to system objects is determined by a special mechanism – access matrices. This mechanism allows different users and groups to have different rights to system objects (create, view, edit, create versions, delete, etc.). Access rights can be granted both indefinitely and temporarily.
Companies resort to horizontal types of mergers/acquisitions if they are interested in expanding and increasing the scale of production through acquisitions of companies belonging to the same industry as the buying company.
The second type of acquisition is characteristic of corporations seeking to partially or completely control the entire production process, starting, perhaps, with the extraction of raw materials, and ending with the sale of finished goods. For example, the well-known still maintains in its composition the production of almost all parts and components, from the engine to the chassis and body. Foundry and tool production is preserved here. We can say that the plant makes cars, ranging from metal blanks and sheets. The main reason why companies enter horizontal and vertical acquisitions is the synergy from the processes generated by the acquisitions.
This can be both optimization of fixed production costs, reduction of marketing and administrative management costs within the company, and correlation of the size of the company with the size of funds that it attracts to finance its projects; or using laboratories and the results they have already achieved for their own purposes. One way or another, the management of companies acts in the framework of increasing the profit of shareholders, moreover, most often of the shareholders of both companies, because the target company is often sold in a developed market with a certain (far from small) premium.