An Evaluation of the Effectiveness of Mergers and Acqusitions in the Russian Mobile Network Operators Market

<p>The paper &laquo;An Evaluation of the Effectiveness of Mergers and Acqusitions in the Russian Mobile Network Operators Market&raquo; consists of 3 chapters, 17 pictures, 52 tables. The volume of the paper is 100 pages. Key words: mergers and acquisitions, effectiveness, synergy, telecommunication sector.</p><p>The assessment of the effectiveness of M&amp;A deals is considered to be problematic and there is no consistent practice. The reason for this fact is because many of the combined companies are lagging behind in their development and many M&amp;A deals are not worth invested money. The key point of this study is to analyze investment deals in telecommunication sector. This research provides information about what kind of methods there are to measure the success. Particularly, in this study discounted cash flow and effect of synergy are calculated. Subsequently, the success of telecommunication M&amp;A deal is evaluated. The focus audience of this study is economists, especially in financial sphere.&nbsp; The results from this study assist valuable new knowledge to practitioners and researchers in M&amp;A fields and contribute the achievement of successful M&amp;A deals.</p><p>The aim of the research is to consider mergers and acquisitions in the Russian mobile network operators market. To investigate this topic some quantitative methods of evaluation are used.</p><p>The research proposal starts with the introduction to the research topic. After that, the literature review dealing with M&amp;A is presented. In the literature review on M&amp;A, the M&amp;A definition, the overview of M&amp;A in telecommunication market are described. Furthermore, different views of the authors on this topic are reviewed. In the next part, the research methodology and research strategy are discussed in order to find the answer to our research question. Finally, the main results and analyses are discussed and the conclusion is presented.</p><p>The empirical study can be categorized to financial statement studies and case studies. In the financial statement study the effects of the M &amp; A deals to the merger&rsquo;s /acquirer&rsquo;s and the target&rsquo;s balance sheet are analyzed. The next point is evaluation of the company&#39;s value through the weighted average cost of capital model (WACC). Besides, the required rate of return is evaluated with the Capital Asset Pricing Model (method CAPM).</p><p>From financial statement study we can make the discounted cash flow (DCF) model. In this model the future cash flows of the target company are evaluated. After that, the evaluated cash flows are discounted in order to give a value of the target company added with other cash inflows such as business divestments or asset disposals subtracted with acquisition costs, debt expenses and other expenses such as tax on gains from divestments and disposals to give a value for the equity of the target. Finally, the evaluated equity value of the target company is compared with its preacquisition stand-alone value to determine the added value from the M&amp;A deals and the firm has to decide how much of this added value should be given to target shareholders as control premium.</p><p>Furthermore, the effect of synergy is investigated, that provides information about financial benefits which are created by the combination of companies after the merger&#39;s or acquisition&#39;s deals. The effect of synergy is 56,44 billion rubles. Due to the present value of the target company, effect of synergy and costs incurred for the deal net present value of M&amp;A deal (NPV of M&amp;A) is calculated (73,34 billion rubles). This fact helps us to identify that analyzed deal is effective.</p><p>Thus, we can conclude that in recent years in Russia, as well as throughout the world, there is the rapid growth in the number and volume of transactions M &amp; A. It should be mentioned that, in most cases, potentially winning deals are ruined by the poor quality of the preparation and conduction of integration. &nbsp;Therefore, it is important to determine whether the M&amp;A deal corresponds to criteria of the value maximization.</p><p>In the research proposal different papers and books about mergers and acquisitions by foreign authors of doing business, its evaluation and cost management of company are analyzed. On the assumption of the accessibility of information for the analysis the most appropriate method for the study, namely the income approach, was chosen.</p><p>During the process of research different methods of collecting data, such as complex of economic analysis, empirical research method, specifically the retrospective analysis are used. Moreover, it should be mentioned that forecasting method, comparison, analysis and synthesis of theoretical and practical material can be appropriate for the analysis. Particularly, methods for assessing the financial position of the company, the income method of assessment and other approaches of evaluation the effectiveness of mergers and acquisitions are considered.</p><p>For the research financial statements for analysis are chosen (Forms 1 and 2), which are freely available and are required for publication in large public companies. Besides, the discounted cash flow (the DCF) is calculated to evaluate the future cash flows of the target company in a M&amp;A deal.</p><p>After examining the nature of mergers and acquisitions, it is concluded that the main goal of M&amp;A consists of the growth capitalized value of the merged company, which provides a competitive advantage in the processes of globalization. Besides, it should be noticed that the final objective of mergers/acquisitions is to achieve synergy that provides increasing of the efficiency of the business combination.&nbsp;</p>