The merger aims to increase the market value of the companies. This is explained through the synergy effect.
The market value of the joint venture exceeds the sum of the market values of the companies considered independently.
The economic decisions of the company must tend to increase its market value, that is, to maximize the value of its shareholders.
The synergy effect consists precisely in increasing the market value through integration or collaboration processes.
M&A (Mergers and Acquisitions) operations are complex and carry significant risks.
An M&A transaction is an investment decision.
TYPES OF SYNERGY
REASONS TO PERFORM MERGERS AND ACQUISITIONS (M&A)
Acquisition
Combination of two companies in which only one company survives. The acquired company disappears. The acquiring company assumes the assets and liabilities of the acquired company.
A + B = A
Fusion
Combination of two or more companies to form an entirely new company.
A + B = C
REASONS TO MAKE M&A
Maximize value: Synergy
Search economies of scale
Expansion of the range of products and services
Business complementarity
New distribution channels
Entity size
Power ambition
Mimicry
Reduce uncertainties
Defensive considerations
Business reservations
Shareholder value
It is important to keep in mind that the merger does not always have a positive result.
WAYS TO MAKE M&A
Initial Analysis
Profile of companies to integrate
Protocol of intentions
information exchange
Company valuation
Shareholders Agreement
Exchange Equation
Definition of merger balances
Sign merger agreement
Due Diligence
MERGERS AND ACQUISITIONS (M&A) FAILURES
Different corporate culture «Cross Cultural Management», language differences, differences in the conception of social relations between the merged parties, especially in transnational operations.
For employees, they can generate uncertainty, because they are almost always accompanied by job restructuring.
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