2015 was the record year in terms of transactions in mergers and acquisitions

2015 was the record year in terms of transactions in mergers and acquisitions

27.09.2016 Analytics

Every day there is a new information about the latest merger / acquisition among large enterprises. As a result of these major agreements, the price of which often amounts to billions of dollars, new company giants appeared in the world market. Moreover, agreements on mergers / acquisitions are active in all areas of business – between aircraft manufacturers, automotive companies, large corporations in healthcare, technology giants, chemical enterprises, financial institutions, etc.

Based on the information, which was provided by the Dealogic company, 2015 was the record year of number of M & A agreements, the amount of which for the year totals $ 5 trillion. The previous record-breaking year for the commission of mergers and acquisitions was 2007, when the total amount of the agreements for the year was $ 4.6 trillion.

Why businesses are increasingly seeking to unite?

If we consider the trend of the development of enterprises in the 80’s -90’s, the basic principles of development were:

– saving;

– flexibility.

Since the second half of the 90’s went another trend – large companies began to look for other ways to develop and expand its production  and there were mergers and acquisitions. The trend towards mergers and acquisitions has also been a way “to survive” for companies that were in decline or under bankruptcy.

In many works, lawyers, economists, financiers, who are devoted to the study of trends in mergers and acquisitions, there are  a lot of reasons for enterprises to enter into such agreements:

  1. The solution of orgent problems of the company (cost reduction, optimization of production, obtaining more favorable tax rates, better management, and others);
  2. Access to the world market (combining efforts, the companies expanded its business to have a chance to obtain new large contracts, significantly increase profits);
  3. Monopoly motive (through mergers and acquisitions, the companies publicly or secretly seek to strengthen their monopoly positions in a particular business environment).

The most active sector of mergers and acquisitions in the past year were contracts with the health sector, where the number of agreements has increased by 50% to $ 340 billion, because of the high investors’ interest in the development of new drugs and modern methods of diagnosis of various diseases.

In  the oil industry the number of agreements has doubled and amounted to $ 264 billion. Agreements in the field of engineering totaled $ 247 billion, an increase of 69%, in the telecommunication sector the agreements totaled $ 211 billion, an increase of 13%.

One of the leaders of the global Ernst & Young organization and the head of the international practice of consulting services agreements Pip MakKrosti states that 2015 was marked by the fact that the upward trend in the number of mergers and acquisitions observed in all spheres.

5 most major agreements in 2015:

  1. Combining Pfizer Inc. and Allergan Plc for $ 160 billion.
  2. The biggest merger in the beer industry – Anheuser-Busch InBev and SABMiller Plc for $ 107 billion.
  3. The merger agreement between the oil company Royal Dutch Shell Plc with the British gas company BG Group Plc for $ 81.5 billion.
  4. Integration of Charter Communications and Time Warner Cable for $ 79.6 billion.
  5. Agreement on the merger between the two largest chemical corporation Dow Chemical and DuPont in the amount of $ 68.6 billion.

For comparison, Ukraine in the past year has made to the common rate in M ​​& A transactions for $ 1 billion. The most involved areas are agribusiness, IT and energy sector. These industries are always interesting to investors, despite the political and economic difficulties.

The largest Ukrainian mergers and acquisitions in Ukraine in 2015 according to the magazine Forbes were:

  1. The purchase by the Turkish company Turcell 44.96% of the shares of Euroasia Telecommunications, the owner of the national telecommunications operator “Astelit”, in the amount of $ 100 million.
  2. An investment of US billionaire George Soros in Ukrainian IT-company Ciklum (the exact price of the agreement was not disclosed, although Soros said in an interview that he is ready to invest in Ukraine up to $ 1 billion.)
  3. In the pharmaceutical field was signed a major deal to sell a 30% stake of Borschagovsky Chemical and Pharmaceutical Plant to Kiev city council, the price of the agreement – 171, 8 million UAH.
  4. The exchange of assets between the companies “ Voronezh Agro Holding” and Agrokultura land bank in Ukraine for 87%.
  5. “Mandarin Plaza” was bought by a foreign company from Cyprus, its name is not disclosed. The amount of the agreement is approximately $ 40 million.

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