Mergers and acquisitions 2020

Nov, 05 2020

Mergers and acquisitions are one of the most common ways to expand your business. As part of the M&A transaction, the participating companies are merged into one legal entity, and in the future, they conduct business together as an integral structure.

The large number of mergers between the largest companies is eloquent evidence of how profitable such transactions are. Moreover, these deals are equally popular both at the national and international level. If at the beginning of the last century, almost 30 such transactions were concluded in a year all over the world, today the bill goes to thousands.

The largest transaction on the Russian M&A market was the purchase of more than 99.5% of the shares of Mezhdurechye JSC in February 2020. The buyer was Onega holding, and the seller was the state development Corporation VEB. RF. the transaction Amount was more than $ 3.5 billion.

At the same time, it is worth noting that the spread of coronavirus infection had a significant impact on the Russian M&A market. The pandemic forced companies that had previously planned to enter an M&A deal to abandon their plans and focus on supporting their own assets. However, this is not only a domestic trend because the similar situation has developed in other countries, as the COVID-19 pandemic has caused an economic crisis all around the world.

Another important, but smaller deal in the territory of the Russian Federation was concluded in the electric power industry. On the 2nd of March, the Finnish energy company Fortum announced that it had received a decision from the FAS of Russia from the government Commission on foreign investment to approve the takeover of the German UniPro. This transaction resulted in the consolidation of more than 73% of UniPro’s shares through a phased buyout of securities from its parent company, Uniper. The deal was worth $ 2.1 billion.

Looking at the international M&A market in 2020, we can’t help but mention Uber’s acquisition of Postmates. It specializes in food delivery – these services have become extremely popular due to the quarantine. The deal was worth $ 2.65 billion. This agreement allowed us to combine two of the largest companies in the United States in one area.

At the same time, Uber management is optimistic about further development of the transformed company by introducing innovative technologies and providing a better experience for consumers. It is worth noting that this deal allowed Uber to strengthen its competitiveness in the American food delivery market.

The next significant deal in 2020 is Amazon’s acquisition of startup Zoox for more than $ 1.5 billion. Zoox is an American Autonomous vehicle company. Amazon’s interest in the driverless car market has increased significantly recently, as evidenced by the company’s acquisition of stakes in two other electric car manufacturers: Rivian and Aurora.

MasterCard financial Corporation announced in 2020 the acquisition of Fincity banking company for $ 825 million. Fincity is a startup that specializes in open banking. The acquisition of this company will allow MasterCard to promote and improve its own open banking strategy.

Facebook, the world’s largest social network and company of the same name, is well-known in the m & a market due to the frequent conclusion of such deals with innovative startups. In may 2020, it announced the acquisition of Giphy, a popular library for searching GIF files (moving images). The goal of the startup acquisition is to include this service in Instagram. It’s worth noting that Instargram is another app that Facebook managed to buy out earlier. The amount of this transaction is estimated at $ 400 million.

Zoom, an American communications technology company known worldwide for providing remote conferencing services, announced in May 2020 the acquisition of secure messaging startup company Keybase. The acquisition of the startup is aimed at strengthening the security of Zoom, with which the platform had certain problems identified during the global COVID-19 pandemic.

Keybase ensures the reliability and security of message content, which, thanks to special technologies, cannot be viewed or listened to by anyone other than the parties involved in the dialogue.

Thus, one of the main motives for entering M&A transactions is usually the desire of counterparties to increase the profit of the organization through the complementary cooperation of two or more companies. This fact is confirmed by the global practice of mergers and acquisitions in 2020, which participants are both world-famous companies and smaller legal entities from various fields of activity.

So, at the end of the topic, we will note the main advantages and disadvantages of mergers and acquisitions 2020. The advantages of entering M&A contract include:

  • improving competitiveness;
  • getting a proven sales system;
  • improvement of production indicators;
  • expanding the scope of activities and entering new markets;
  • increase profitability, increase profits.

However, such transactions are not without drawbacks. First, the M&A procedure is a complex, complex issue that requires serious and expensive preparation. Before the first draft of the contract is available, many preliminary procedures need to be carried out: from risk assessment to financial analysis of the company. Second, disadvantage is high financial costs, so even successful large corporations are forced to attract additional sources of funding.

Finally, the disadvantages include the complexity of integration, especially in vertical mergers and acquisitions, as well as possible problems within the enterprise. Not all employees can agree with the new internal policy of the updated company.

Author of the article
Mergers and acquisitions 2020
Valentina Khlavich
Managing Partner
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