Право / 10.
Хозяйственное право
PhD student Aldabergenova Botakoz
Eurasian National
University after of L.N. Gumilyev, Kazakhstan
Practical
problems of the M&A implementations
Mergers
and acquisitions, as one of the most complex and expensive business directions
at the present, do not lose their relevance in the business world for a
century. But for the countries such as Kazakhstan, which came on the way of a
market economy in a relatively recent time and tend to move from the category
of developing countries to a higher economic level, the processes of
capitalization, expansion capital, successful business development and access
to the world markets are particularly valuable.
However,
most of the M&A transactions, both national and international scale, have
negative sides, and do not always have a positive impact on the economy. Thus,
serious problems include the development of monopolies or oligopolies in the
individual national markets, increased market power and the implementation of
restrictive practices for the foreign companies. In many developing countries,
large foreign companies have become leading companies in the local market,
which constitutes a danger of transition of national industries under the
foreign control. But even in a such situation, supporters of the M&A
transactions note its good sides that the M&A is not only the occurrence of
the international companies into the national economy and contributing to its
growth, but an approximation of the national economic and legal systems into
conformity with international standards, as well as production and delivery of
highly competitive products or services into local markets, especially in the
developing countries.
The
internal negative possible consequences of the M&A include: the failure to
reach by companies participating in the M&A transactions of their planned
results, which in some cases not only failed to meet the expectations of the
M&A transactions' parties in return spent forces and resources, but often
turns out to be unprofitable for the parties, or leads to a destruction of the
cost of capital.
Speaking about the
main problems of the M&A transactions and the high proportion of the
possibility of their failure they can be grouped and shown in following:
1) The
interests of individuals often prevail over the interests of companies, which ultimately negatively affects
the outcome of the M&A transactions.
2)
Deficiency prior thorough investigation of all aspects of the mergers and
acquisitions (due diligence), legal,
financial, economic, marketing, human resource management, issues management,
etc.
3)
Improper formation of the team leaders.
4)
Incorrect choice of evaluating the company.
5) Overly optimistic approach
to the calculation of the expected synergies from the M&A transactions.
6) Does not take into account
economic situation and situation in the industry.
7)
Inability to manage risk.
8) The
emphasis in many M&A transactions being done on reducing costs, rather than
on the development of the company.
9) More
than 60% of the merged companies seek to achieve rapid success due to job cuts
or closing businesses.
10) The
lack of detailed designed program of the companies’ integration.
11)
Inability to bring together information systems.
12) Lack of proper attention to potential
customers, partners, suppliers and other turned out communications of the
acquired company.
13)
Unrealistic plans for the merger.
The
above-mentioned shortcomings in practical implementation of the M&A
transactions are the problems encountered in all countries, regardless of their
level of economic development. However, as international practice shows, in
developed countries those carry out the mergers and acquisitions for a century
like United States and Western Europe, the implementation of the M&A much
more effective in contrast to developing countries with high levels of
corruption and bureaucracy (which, unfortunately, applies also to the
Kazakhstan).
Many developing countries, in
particular post-Soviet countries, especially Kazakhstan, in addition to the above
mentioned problems of the M&A are also characterized by certain specific
shortcomings, which include:
1) The
weak availability of skills able to conduct the M&A transactions.
2) The
imperfection of the legislative base of the country where the M&A transaction
takes place.
3) Lack
of transparency in doing business in the country and in the ownership structure
of companies.
4)
Underdevelopment of the stock market.
5) The existence of a strong
affiliation of companies with financial-industrial groups.
6) Lack of both theoretical and
practical experience of local companies.
7) A constant process of
redistribution of ownership in the companies.
8) The interest of shareholders and management
companies not so much in the effective management, as in providing personal
control over financial flows and the withdrawal of the company's assets in
private ownership.
9) A significant proportion of government
capital equity of the largest and financially stable companies.
10) Complete identity of company managers and
its owners.
11) The weak role of antitrust authorities of
the country.
Each of these deficiencies leads to
a huge outflow of skilled personnel, loss of customers and suppliers, a
noticeable decrease in productivity, inefficient management, and the high cost
of buying company to restore the situation, and other adverse effects. All
these ultimately do not justify the merger or takeover. Such reasons do not
only fail to achieve growth in value of the newly established company, but also
lead to its destruction. It is revealed only after committing the M&A
transaction in phase of the post merger integration when it is possible to see
a real performance of newly established company.
References:
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поглощений» // Вестник McKinsey. –
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2004, № 5;
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