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National Research University Higher School of EconomicsStudent ThesesThe Analysis of Mergers and Acquisitions Deals (the Case of "Rosneft" and "TNK-BP")

Student
Title
Supervisor
Faculty
Educational Programme
Final Grade
Year of Graduation
Azat Nigmatullin
The Analysis of Mergers and Acquisitions Deals (the Case of "Rosneft" and "TNK-BP")
Management
(Bachelor’s programme)
9
2017
Diploma work is aimed at analysis the acquisition deal of OJSC "Rosneft" and OJSC "TNK-BP". To reach the primary aim, the following objectives need to be completed:

- to identify the main reasons for carrying out M&A deals;

- to analyze the market of M&A;

- to analyze the method of discounted cash flow;

- to investigate the oil and gas industry;

- to calculate the value of Rosneft and TNK BP companies before and after M&A transaction.

- to evaluate the synergistic effect of the acquisition and to draw a conclusion about the effectiveness of transaction.

Using the method of discounted cash flow helped to calculate the fundamental value of Rosneft with the synergy effect, which is equal to 2369.05 billion rubles, or $76.42 billion. The data was derived from the annual published IFRS, analytical reports of leading consulting firms such as Ernst & Young, PWC, AK&M, Ak Bars Finance, Veles Capital and Gazprombank. The cost of equity was calculated by using the CAPM model, while the total cost of capital was presented as the weighted average cost of capital (WACC). The fair value of Rosneft and TNK-BP without synergy effect is equal to 1007.465 billion rubles, ($ 32.49887 billion) and 1244.447 billion rubles, or $ 40.143 billion, respectively. As for the effect of synergy, its size amounted to 117.13734 billion, rubles, ($ 3.7786 billion). The effectiveness of the transaction depends on the amount paid by the acquiring company of the target company. In the case of Rosneft, its size was $ 56 billion, while the fair value of TNK-BP does not exceed $ 40,143 billion. Premium for control ($15.857 billion) destroyed the effect of synergy. Rosneft redistributed the winnings from the deal in favor of TNK-BP shareholders by overpaying for the target company. Thus, it can be concluded that the acquisition transaction is effective only for TNK-BP shareholders.

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