Cherednik A.O.
Simon Kuznec Kharkov
national university of economics
MERGER AND ACQUISITION`S PRACTICE IN UKRAINE
Merger
and Acquisition`s practice in Ukraine
Modern tendencies
of the world economy reveal themselves in its globalization, technological
progress, diversification, liberalization of markets. Combination of this
factors causes the need to make the forecasts of corporation`s own assets all
over the world. Globalization of the economy confronts corporations around the
problem of survival in heavy competition, forcing them to look for new ways to
improve their positions in the worldwide market. A large number of corporations
reach this goal through different kinds of transformations, such as merger, acquisition and corporate
restructuring of a company.
It also should be
stressed that processes of acquiring control over the company and its
reorganization processes are a new and rare phenomenon for Ukraine. Throughout
the entire period of Ukraine's existence as a state there were observed series of transactions, which are in
accordance with the legal framework can be attributed specifically to the
processes of merger-acquisition (conglomerate, horizontal, vertical, both friendly
and hostile nature) [3]. The history of the largest companies and
financial-industrial groups in Ukraine, such as SCM (System Capital
Management), Privat and others, is a good example of mergers and acquisitions
[4].
In the modern
Ukrainian theory of corporate finance, the terms "merger", and
"acquisitions" do not have clear distinction and are commonly used
together. Globally accepted term M&A (Mergers and Acquisitions) is equal to
the definition of companies "mergers and acquisitions". As we have
already mentioned, the leading economists in corporate finance and company
valuation have no consensus on the definition of the terms "merger"
and "acquisition", therefore, to form a personal attitude to this
issue, and further research we analyzed the existing opinions and identified
those that meet the objectives of our study [1].
Thus, analyzing
the existing definitions and opinions in the economic literature under the
“M&A” companies it will be understood the process that has the goal of
which is to expand the area of influence and economic power by one company
(company-initiator) through taking control over another company (the target
company), the acquisition of full or partial ownership of its assets, improving
the welfare of shareholders and the protection of their rights, be able to change
the riskiness of the cash flows of the combined company and achieve competitive
advantage in the market.
Patrick A.
Gaughan has a very meaningful opinion concerning to the problem of determining
the following terms. He define merger as
“a combination of two corporations in which only one corporation survives and
the merged corporation goes out of existence” [2]. In a merger, the acquiring company assumes the assets and
liabilities of the merged company. Sometimes the term statutory merger is
used to refer to this type of business transaction. It basically means that the
merger is being done consistent with a specific state statute.
It should be
noted that merger differs from a consolidation,
which is a business combination whereby two or more companies join
to create an entirely new company. All of the combining companies are dissolved
and only the new entity continues to operate. In consolidation, the original
companies stop to exist and their stockholders become stockholders in a new
company.
One way to look at the differences between a
merger and a consolidation is that with a merger A+B=A, where company B is
merged into company A. In a consolidation, A+B=C, where C is an entirely new
company. Despite the differences between them, the terms merger and consolidation, as is true of many of the terms in the M&A
field, are sometimes used interchangeably. In general, when the combining firms
are approximately the same size, the term consolidation applies; when the two firms differ significantly
by size, merger is the more
appropriate term.
Another term that
is broadly used to refer to various types of transactions is “takeover”. “Takeover” is a synonym of the term “acquisition” This term is
vaguer, sometimes it refers only to hostile transactions, and other times it
refers to both friendly and unfriendly mergers.
By implementing
strategy of merger and acquisition, the company provides, on the one hand, the
protection of its interests, on the other - the realization of competitive
advantages. Considering it important to understand that the merger-acquisition
is a process of change in ownership or ownership structure, as the final link
in the process of restructuring.
An activation of
mergers and acquisitions in the post-crisis period in Ukraine is a logical consequence
of world situation reform work. Increasing the number of M&A is observed
since 2013, so the number has grown from 30 in 2012 to 150 in 2013, and in 2014
reached 160. In monetary terms, the increase in 2014 is approximately $8
billion, which is several times higher than the result in 2013, which amounted
to $2.81 billion.
However, it
should be noted that this increase was due to two major transactions: the sale
of Inter Media Group to Group DF structures for more than $2 billion and resale
of "Ukrtelecom" to SCM structures for $1.3 billion [4]. These
transactions are accounted for half of the total volume of transactions.
Therefore, we can say that there is a growth trend in the number of
transactions, with a relative decrease in the size of transactions in monetary
terms.
An increase in
potential of the market for mergers and acquisitions in Ukraine associated with
low consolidation of particular sectors, such as agro-industry, where the one
of the growth factors is a further increase in prices for raw materials, as
well as the ability of large companies to compete on domestic and foreign
markets.
Important factors
that affect the development of the domestic market and M&A growth in
M&A transactions in Ukraine are also privatization of several state
companies; increase in the number of transactions carried out by private equity
funds and foreign investors and aimed at attracting investment and improving
the investment climate in Ukraine; growth in the number of acquisitions of
strategic assets of large Ukrainian business groups by big foreign business.
References:
1.
Kublikova T.
Determination of the M&A market in Ukraine / T. Kublikova, O. Tarasova //
British Journal of Science, Education and Culture. – 2014. - №1.(5). – P.
522-526.
2.
Gaughan,
Patrick A. Mergers, acquisitions, and corporate restructurings / Patric A.
Gaughan.—4th ed. 2008.
3.
Шура П. Слияния и поглощения. Путеводитель по рынку
профессиональных услуг // Серия путеводителей -справочников «Проверено.
Коммерсантъ». ‒М.: А С. 14, 15.
4. Рынок слияний и поглощений в 2014 году вырос в два раза, 24
декабря 2014 [Електронний ресурс]. ‒ Р http://economics.lb.ua/business/2014/12/24