Mergers and acquisitions

Mergers & Acquisitions ( M & A, M & A activity ) is a collective term for transactions in the corporate sector such as mergers, acquisitions, business transfers, leveraged buyouts, outsourcing / insourcing, spin-offs, carve- outs or corporate collaborations. The industry of dealing with this service as a business consultant, accountant or investment banks is aggregated under Mergers & Acquisitions; in the investment banking sector is M & A as part of the field of corporate finance.

General

The Anglo-Saxon word combination Mergers & Acquisitions consists of two terms, already give a rough indication of the entrepreneurial activities, which are summarized here under. " Merger " are mergers under " acquisitions " refers to acquisitions. Goal of every entrepreneur is to be protected by appropriate measures the existence of his company and achieve growth. Growth is in the form of internal growth (such as sales growth ) but only a very limited extent; greater growth success can be achieved in the short term only through external growth. This in turn is possible only through mergers, acquisitions or other external transactions. The by the buyer ( the "Investor " ) to be acquired business ( "target" or " target company " ) significantly increased immediately by the merger turnover, market share, company size, and thus the market power of sale consent to company. If one abstracts from the partial services of other parties, such as law firms or investment banks, so Mergers & Acquisitions " includes the process and the result of strategically motivated purchase or merger of companies or parts of companies and their subsequent integration or resale. This is associated with a transfer of management, control and disposal powers. "

History

The two terms of mergers and acquisitions is about since the first wave of takeovers in the United States that began in 1895. Since then, there is a lack of a uniform definition. In the past there have been in the U.S. five M & A waves, so that M & A represent a cyclical phenomenon. A first wave there were 1897 to 1904 mainly with horizontal integration, a second wave followed 1916-1929 in the form of complete vertical integration, the third wave joined from 1965 to 1969 and had mostly diversifications by conglomerate integrations subject, a fourth wave with mostly vertical Desintegrationen took place 1984-1989, the fifth wave began in 1993 and ended in 2000 with predominantly globally integrated designs. In the U.S., the transaction type of hostile takeover is established conceptually since 1974 since 1974, the greatest magnitude transaction in Germany has been the hostile takeover of Mannesmann by Vodafone Mobile in February 2000 with a volume of 198 billion euros.

Antitrust Regulation of November 1923 was in Germany, the first attempt to control the wave of mergers and to slow down the formation of cartels. The first antitrust law of March 1933 authorized the Nazi government to unite the interests of our economy as a whole in forced cartels. After the Second World War forced all cartels were dissolved and banned in July 1945 by the military governments as part of a Dekartellierung. The force in Germany Act against Restraints of Competition ( Cartel Act ), as amended on July 15, 2005, contains a general prohibition with exceptions and includes a preventive cartel control. Konditions, discount, standardization and typer and pure export cartels require registration and are subject to abuse control; Crises, rationalization and foreign trade cartels are subject to approval by the antitrust authorities. Similar provisions can be found in Austria in the Antitrust Act of 2005, also apply in Switzerland for the cartels restrictions ( Federal Act on Cartels of 6 October 1995).

Species

The enumeration of the types of M & A opens up the rich diversity of entrepreneurial activities in this area. With the merger by acquisition, the acquiring company assumes the assets and liabilities of the target, the target loses its existence (a b = a). The fusion through formation leads to the merger of two companies and to the subsequent formation of a new company (a b = c). An essential part of M & A activity is attributable to acquisitions and leveraged buyouts. Acquisitions differ from mergers by the change of the owner, the investor leaves the management in the event of a corporate acquisition. Leveraged acquisitions are characterized by a high proportion of debt in financing the target purchase price. Also of importance are covered by the "corporate restructuring" outsourcing / insourcing, spin-offs or Curve -outs. Cooperation can in turn be divided into strategic and operational cooperation. In strategic cooperation company voluntarily working together as joint ventures and strategic alliances, co -operative may be interest groups, consortia, associations or cartels.

Expiration

M & A transactions usually start with the search for suitable targets ( " deal search" ). It includes the evaluation of potential targets ( "due diligence" ), followed by negotiations with the shareholders and / or management of the target ( " deal negotiation" ), which are held in a term sheet. A letter of intent can reaffirm the commitment of the two parties to try to successfully complete this transaction. The bilateral contracts ( " deal documentation" ) is accompanied by law firms, accountants, management consultants or investment banks. After purchase provides the investor the investment controlling ( " deal monitoring" ) for a permanent monitoring of the development of the target, where necessary, later sold ( "exit" ).

When it comes to the completion of the M & A transaction ( "signing " ) and all the conditions listed therein are met, the contracts are fulfilled in the framework of the " closing" on both sides. Companies are often under the auspices of investment banks in the context of auctions ( "controlled auction" ) were sold. Only certain investors ( bidders ) are approved as prospective buyers. With each bidder and each separate confidential negotiations are conducted. The company is eventually sold to the investor who ( from the perspective of the seller ) offers the most favorable terms and the highest purchase price.

Legal Issues

Which transactions are required to complete a particular M & A transaction fairly effectively depends on the type of transaction. In most cases ( corporate acquisition, takeover, merger) is based on an asset purchase agreement.

Germany

When companies purchase contract, the company is legally transferred as a whole, but in the context of singular succession its component parts such as land, buildings, machinery, receivables or liabilities. With the purchase of not only the assets of the target company, but also its liabilities are incurred.

According to § 453 para 1 BGB, the requirements on property purchase will not only to the purchase of rights, but also on the purchase of " other objects " corresponding application; this also includes undertakings or parts thereof, such as fall in the spin -off. "The company " as such can not be the subject of a single rem fulfillment business under German law. According to the " principle of specialty " property law is dominant rather a single transfer of all objects belonging to the company ( "assets " ) required accordance with the applicable rules. This can include the transfer of ownership of movable or immovable property, as well as the assignment of receivables and other rights and also includes also includes debt assumption or mere real instruments such as the transfer of the customer base or the disclosure of trade secrets. The so-called " asset deal " is thus legally nothing more than either a purchase of individual objects or a form of performance of the company acquisition.

A purchase agreement itself is not bound in Germany to a particular form, but there are regulations, which establish the need for notarization of the business purchase agreement in individual cases. Thus, the acquisition of shares in a GmbH regularly notary to record that ( § 15 para 4 Limited Liability Companies Act ). This is true even if a lot of the assets of the company belongs ( § 311b para 1 BGB). A purchase agreement must be in accordance with § 311b para 3 BGB also in the sense of § 128 BGB be notarized in conjunction with § § 1 et seq BeurkG if he has a lump sum to the current assets of the acquiring firm to content. According to the jurisprudence of the Supreme Court and the Federal notarization can be avoided if the individual asset components are specifically named and fully listed in the purchase agreement. However, this requires a seamless contracts, to avoid the risk of missing a notarization and nullity. The OLG Hamm has stated in the cited decision of 26 March 2010 contract of sale in a specific case for lack notarized void. The parties had been included in the share purchase agreement, a list of inventory and inventory items as well as various, precisely designated claims, but in addition also the acquisition of "all assets" agreed and not specifically included trademark and various furnishings from the assets of the GmbH in the acquisition agreement. Unlike land sale contracts and assignments of the shares according to § 15 para 4 Limited Liability Companies Act could in this case the lack of notarial form can not be cured by the execution of the purchase contract. missing it at these contractual requirements, the asset purchase agreement 125 BGB is due to procedural defect under § void.

In addition, to check regularly with antitrust issues, in particular whether the company purchase a registration and notification requirements of the Federal Cartel Office or the European antitrust authorities, subject to ( Merger ).

International regulations

After the Anglo-Saxon legal maxim Caveat emptor, the buyer bears the risk that the purchased item is free of open material and legal defects. " May the careful buyer " is an Anglo-Saxon " common law " in particular on corporate acquisitions applied rule of law. After that, it is the buyer's risk, to capture all the goods concerned, the circumstances and to identify any deficiencies. The risk is thus initially with the purchaser, who enjoys no legal protection. Therefore, it is international practice of minimizing the due diligence the buyer risk or even mutually exclusive. Here, the seller may the circumstances known to him - as in German law - but not silent. Even in Germany, see Acquisitions usually not without due diligence tests. According to the prevailing opinion and held that the due diligence therefore not part of common usage. You should also not just turn off the supposed buyer risk, but is primarily determining the purchase price.

Criticism

Studies to quantify the M & A failure to around 2 /3 of all transactions, which is often due to the lack of integration of corporate cultures. However, this raises the question often after the success criterion. Most studies look at the market price or the profit and loss account. In addition, there are interviews, case studies and as an indicator of whether the company was later sold ( "stay or sell "). Examples of the latter in the German-speaking area are eg the purchase of Dresdner Bank by Allianz and a subsequent sale to Commerzbank or the acquisition of Winterthur Insurance by Credit Suisse and the subsequent sale to AXA Insurance ( both examples of a failure of the bancassurance concept ) or Daimler Chrysler and the subsequent spin-off and sale. For a variety of companies and M & A transactions, however, neither market prices nor financial statements are available because these are either not listed or whose financial figures are not required to be disclosed (see, for a comprehensive overview of successful studies and a großzahlige survey with German participation. )

The success of M & A are often lower than expected, either because already the strategic considerations are misguided to high purchase prices paid or the expected cost and value synergies ( eg economies of scale ) is not set or more than offset by integration and coordination costs. The potential synergies are usually designed to be very ambitious to justify the premium paid (the difference between market value and purchase price ).

Success studies on M & A often consider only one dimension of M & A. Thomas Straub in "Reasons for Frequent Failure in Mergers & Acquisitions - A Comprehensive Analysis", 2007, examined in a comprehensive study of the influence of multiple dimensions (strategic logic, integration aspects and financial aspects / price) to the failure of M & A. The result of the study shows that all three of these dimensions have a significant impact on the success of M & A.