We’ve earlier discussed the matter of corporate mergers and acquisitions, speaking about the legal framework governing these transactions, the challenges involved in securing requisite permissions, and related facets.
Given the escalating frequency of mergers and acquisitions (M&A) across the international market and their ongoing upward trajectory, this article will discuss the principal domains of these processes, the reasons and motives for their implementation, and turn to corporate transactions conducted in Armenia.
Global M&A Trends: General Overview
Several prominent international consulting firms such as PWC, McKinsey, Deloitte, and Morgan Stanley have provided insights into the current M&A landscape along with future forecasts. Notably, PWC, in its published article, discussed the anticipated shifts:
“In 2024, the M&A market is transitioning into a new phase markedly distinct from its predecessors. Transaction participants will encounter significantly altered conditions, necessitating a corresponding reassessment of established norms. For instance, financing rates have risen in comparison to the previous decade. Simultaneously, to maintain comparable levels of profitability, transaction stakeholders will be compelled to generate greater value than in previous contexts.
Consequently, amidst an environment marked by macroeconomic and geopolitical uncertainties, those adept at risk assessment and scenario planning will gain an advantage, taking decisive actions with confidence in contrast to those awaiting greater certainty.”
Globalization and Cross-Border Transactions
Furthermore, it is essential to acknowledge the rapid pace of globalization, which has significantly streamlined cross-border corporate transactions, enabling firms to explore growth prospects beyond their domestic boundaries. Alongside the potential for attracting new clients and revenue streams, organizations must also brace themselves for diverse challenges stemming from cultural disparities, adherence to regulatory frameworks, and geopolitical uncertainties.
The Impact of Artificial Intelligence and Sustainable Development
Simultaneously, the business world is experiencing dramatic and cyclical transformations, ranging from the growth of artificial intelligence to the escalating importance of sustainable development. Although even the most effective M&A strategies have always been considered less preferable than organic growth, the latter often takes a backseat when substantial strategic adaptations are imperative.
Connect with our experienced team today to navigate the complexities of M&A in Armenia and access our comprehensive legal services.
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M&A Trends and Benefits
It is noteworthy that M&A endeavors present auspicious opportunities for enterprises to fortify their competitive standing, augment market presence, or penetrate novel geographical markets.
Findings derived from surveys conducted by the reputable Deloitte firm specializing in audit and consulting services testify the following insights:
“A notable 68% of surveyed CEOs have reported reorganizations subsequent to the 2020 pandemic, with others indicating ongoing or anticipated reorganizations within the forthcoming six months. Such initiatives reflect the optimism harbored by corporate entities and private investors concerning the anticipated surge in Mergers and Acquisitions (M&A) activity, considering the post-pandemic “recovery” phase.”
Indeed, these restructuring endeavors serve as preparatory measures geared toward imminent mergers and acquisitions.
Concurrently, numerous enterprises are embracing innovative methodologies, notably integrating generative Artificial Intelligence (AI) or advanced data analytics into their transactional execution processes.
It is noteworthy that in 2024, the evolving geopolitical, technological, and legal landscape will foster a more conducive environment for engagement within the mergers and acquisitions market. For instance, the policies enacted by numerous governments, complemented by tax incentives, are aimed at promoting increased investment in clean energy. On the other hand, these policies also precipitate the gradual abandonment of fossil fuel reliance, thereby indirectly catalyzing the consolidation of gas and oil enterprises.
Of particular significance is the observation that the foremost sectors driving mergers and acquisitions on a global scale encompass healthcare, energy, and information technology. According to the forecasts, put forth by specialists at the investment firm Morgan Stanley, 2024 is anticipated to witness a predominant occurrence of M&A within these industries.
The Impact of Mergers and Acquisitions in the Healthcare Sector
Healthcare M&A trends are mainly related to the need for large-scale research in this area. Taking into account the speed of integration of technological innovations into medicine, it is expected that in 2024 deals will be actively concluded in areas where there is a significant increase in innovation.
However, pharmaceutical and biotech deals will continue to focus on precision medicine, including oncology and immunology. However, attention will also be paid to the areas of weight loss and treatment of the cardiovascular system, which have experienced a renaissance, especially in 2023.
Energy Sector Transformations
Since the beginning of 2023, technology, media, and telecommunications companies, which previously held leading positions in concluding the most active deals, have transferred this role to the energy sector. Forecasts indicate a heightened momentum in corporate transactions among energy companies compared to 2023, given the high profitability of these companies and their aspirations for diversification across other industries.
Moreover, the principles of sustainable development have assumed paramount significance in the contemporary landscape, wherein investors place considerable emphasis on social equity, inclusivity, and diversity, recognizing the interconnected nature of public welfare and profitability. Industry stakeholders are anticipated to actively pursue opportunities aimed at instituting frameworks promoting sustainable development, thereby optimizing and enhancing their remote Environmental, Social, and Governance (ESG) practices.
McKinsey consultants propose several pivotal measures for companies to undertake in anticipation of the forthcoming surge of transactions in 2024:
- Revise and update the company’s strategy, directing investments towards capacities and assets that would effectively enhance the corporate portfolio. Simultaneously, execute divestments with equal vigor and diligence as acquisitions.
- Reframe the focus of mergers and acquisitions initiatives to mitigate the escalating geopolitical risks. This can be achieved by prioritizing localization over geographical expansion, concentrating on segments demonstrating robust market prospects, investing in vertical integration, and enhancing supply chain flexibility.
- Establish a heightened benchmark for value creation to counterbalance the increased capital costs.
- Foster support for partnerships and alternative transaction mechanisms such as joint ventures and alliances to bolster strategic endeavors.
M&A Trends and the Local Market in Armenia
The M&A market trends in Armenia exhibits distinctive characteristics, notably shaped by the prevailing corporate culture inherent to the country. Primarily, Armenian enterprises are commonly founded and overseen on the foundation of familial or amicable relationships. Because of this, the Armenian M&A landscape often lacks conventional illustrations. Transactions of this nature predominantly occur among entities with governmental involvement in management, particularly prevalent in sectors such as healthcare or education.
Simultaneously, the increase of company capital in Armenia typically occurs through the issuance of new shares and the attraction of new shareholders. Thus, the prevalent mode of company acquisition in the country involves transactions executed through the acquisition of shares or equity stakes.
In this context, recent developments concerning planned transactions among financial institutions hold significant importance. Notably, the Bank of Georgia has disclosed ongoing substantive discussions with Ameriabank CJSC regarding a potential acquisition, which would result in the Bank of Georgia emerging as a principal shareholder of Ameriabank CJSC.
Furthermore, Ardshinbank CJSC has unveiled a notable transaction in the financial arena, delineating their commitment to finalize the acquisition of HSBC Armenia, the sole international bank having a presence in Armenia, within the forthcoming 12 months. These transactions reflect the activity and dynamics of the financial sector in the region, where banks seek to expand and strengthen their presence through strategic acquisitions.
M&A Trends in the Armenian TMT Sector
It’s also worth highlighting that the American company Microchip Technology has successfully implemented the acquisition of 100% of the shares of Instigate Semiconductors CJSC. These transactions underscore the dynamism and diversity inherent in investment opportunities within the Armenian market, particularly within the auspicious sectors of telecommunications and information technology.
Conclusion
Our team stands prepared to assist you in executing these reorganization endeavors by delivering comprehensive legal services.
Specifically, we offer:
- Preparation of Documentation: Crafting a package of documents essential for facilitating the processes.
- Compliance Evaluation: Conducting thorough assessments to ensure adherence to pertinent legislation governing the processes of mergers/acquisitions of companies.
- Transaction Consultations and Advocacy: Providing expert consultations on transactions, alongside the representation and protection of the interests of the client in the relevant authorities.
Ready to take action?
Connect with our experienced team today to navigate the complexities of M&A in Armenia and access our comprehensive legal services.
Let’s make your reorganization endeavors a success together!
