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Due Diligence
Šmídová, Jekaterina ; Králíček, Vladimír (advisor) ; Müllerová, Libuše (referee) ; Jiroudek, Jaromír (referee)
One of the main strategic goals of an owner is the growth of their company. To seek company growth in todays ever changing world, company owners and their management frequently turn to the discipline of mergers and acquisitions (hereinafter M&A). This M&A focus is evidenced by the sustained long term growth of the M&A markets, which for example in the Czech Republic alone amounted to a 38% increase between the years 2015 and 2016. The transaction decision making process takes place with an information deficit to the detriment of the buyer. 50% to 70% of transactions will be identified as not meeting the expectations of the buyer, and this is in large part due to the information deficit on the part of the buyer. This thesis takes as its subject due diligence, a tool that enables the buyer to mitigate (but never to fully overcome) the risks brought about by the information deficit. The due diligence process enables the buyer to gather information on the target company and to get to know it in greater detail prior to assuming the full risks of ownership. Due diligence becomes a key component of the M&A process, with direct impact on the transaction valuation and evaluation of the future performance of the target company. This thesis will provide all parties interested in the M&A process with an overview of both general and specific characteristics of the due diligence process and its key components. It will also widen the traditional understanding of the due diligence process, shifting it from a mere pre-investment check-up to a more complex and robust process, that includes the setup of post transaction integration guidelines. The purpose of this thesis is to provide an analysis of the due diligence process in its wider connotations, with emphasis on financial due diligence and post transaction integration. As part of this analysis the key milestones of the due diligence process were identified, and their influence on the increase of the likelihood of a successful M&A process is examined. Based on the stated purpose of this thesis a null hypothesis was formulated (and the analysis and evaluation of the said hypothesis is the goal of this thesis): Due diligence, in its traditional understanding, is a fundamental support tool for the successful realization of mergers and acquisitions. The methodology applied to the examination of the null hypothesis comprises the detailed analysis of information from specialized and academic publications, their theoretical evaluation and comparison to case studies. In line with the stated goal and its hypothesis, this thesis is structured into six chapters. The first chapter defines the term theory of a company and examines the basic economic reasons for the creation and existence of companies. The second chapter describes transactions dedicated to companies and focuses on the underlying reasons for undertaking transactions, and their effect on the methodology of due diligence. The third chapter defines due diligence, describes the process and its key components, and provides theoretical recommendations. The fourth chapter focuses on the practical undertaking of a due diligence process, and examines the applicability of the theoretical recommendations in real life. The fifth chapter examines the post-transaction components of due diligence. The sixth chapter focuses on examination of factors critical to the undertaking of a due diligence, and also on the contractual tools available for the mitigation of the inherent risks. The sources of information for this thesis are mainly, but not limited to, foreign specialized and academic literature focused on mergers and acquisitions, international and local published research, and own research undertaken for the purpose of this thesis. The detailed analytical work undertaken and described in this thesis enabled the evaluation of the null hypothesis and the completion of the stated thesis goal.
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Is the development of the number of realized M&A transactions procyclical?
Červinková, Kristýna ; Stroukal, Dominik (advisor) ; Vozárová, Pavla (referee)
The aim of the thesis is to reveal the relation between business cycle and the number of transactions considering mergers and acquisitions. For this purpose the appropriate macroeconomics indicators have been chosen. The base hypothesis, which stands for the procyclical development of transactions, was examined by regression analysis of panel dataset containing quarterly based data from The Visegrad Group countries in the period from 2000 to 2014. The ordinary least square method together with robust estimation of standard deviation provided the confirmation about positive relation of the quarter change of GDP as the main explanatory variable and the number of transactions. Nevertheless, more robust findings appeared in case of significance of stock markets and public debt. The positive relation of the stock price was proven to be in accordance with the behavioral theory. The increase in transaction activity is capitalized through the profit from the sold of overprized stocks. Unexpected result about positive relation of public debt required the specification of assumption about the lower preference of smooth consumption of The Visegrad group households.
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Realization of synergies in international mergers and acquisitions
Hudečková, Veronika ; Taušer, Josef (advisor) ; Müller, Štěpán (referee)
The volume of mergers and acquisitions in 2014 amounted to 3.6 trillion USD. Acquisition activity over the previous year increased by 26 % and the volume of mergers and acquisitions was the third highest in history after 2007 and 2006. The constantly increasing number of mergers and acquisitions and an increase in the volume of capital required for the realization of transactions stand in stark contrast to the high rate of failure. The primary motive for international mergers and acquisitions is the realization of synergies. The paper analyzes in detail the factors that influence the success of international mergers and acquisitions, especially strategic fit, cultural fit and integration. It also analyzes the motives which lead to realization of those transactions and how they relate to the realization of synergies. The results of previous studies are presented in the theoretical part, practical part is focused on a specific acquisition of Anheuser-Busch, which is part of the global brewing group Anheuser-Busch InBev, which in 2014 bought a small Czech brewery - Pivovar Samson.
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EU merger and and dominating position policy: Forming of Visegrad countries banking sectors by cross-border mergers and acquisitions
Hartmann, Ivo ; Němcová, Ingeborg (advisor) ; Šaroch, Stanislav (referee)
An unprecedented process of financial consolidation has taken place in the European Banking Sector over the past 20 years, which in the Visegrad countries was combined with economic transformation. As such, analysis of mergers and acquisitions is made with a view to the importace of the recent economic transformation and scope for further economic development and the Thesis is introduced by an analysis of the banking transformation in the Visegrad countries. Afterwards follows a theoretical part describing and analysing European legislation concerning banking mergers and acquisitions, incentives for them, factors, that support and hamper them, and the synergy following banking consolidation and its impact for supervisory bodies. Finally, building on the abovemetioned theoretical knowledge and premises, we apply them to the economic and banking environment of the Visegrad countries, i.e. we analyse the impact of the European cross-border mergers and acquisitions law on structural indicators of the banking sectors in the Visegrad countries.
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