The risk-generating nature of corporate mergers and acquisitions

Mergers and acquisitions as direct investments are employment of private-venture capital, intended to ensure the establishment of control and grant the right to manage company directly. An analysis of the risk-generating character of corporate mergers and acquisitions reproductive nature was carried out within an investigation of the factors conditioning the investment environment in the areas. An unfavorable investment environment diminishes investment possibilities, which leads to a shift of emphasis to the sphere of speculative investments. Undeveloped risk management and risk-generating strategic mergers and acquisitions, as well as the dominance of the speculative investments in the Russian economy, conditioned a shift of focus of this research towards speculative transactions that cause negative consequences for the economy, social and political spheres. Inherently similar negative consequences emerge due to a failure to reach predetermined objectives of strategic integration, which leads to a subsequent disintegration. Inefficient integration and fulfillment of speculative merger and acquisition transactions increase the probability of risk in the environment for the further transactions. A complex of economic, political and social factors has an impact on the potential efficiency of these transactions. Risk-generating character of corporate mergers and acquisitions reproductive nature is determined by the impact of the risks on the processes of strategic integration, which were categorized in this work according to the external environment sources: the risks of selecting a development strategy, the risks of executing (management) a transaction and the mature integration risks. Based on functional factors that determine the occurrence of the risks, there are economic, political, social, and information risks. Based on manageability (the ability to minimize the impact and (or) eliminate the risks using common methods of risk management), risks are categorized into unmanageable or difficult to manage and manageable risks. In accordance with the stage of the transaction, risks are categorized into planning, assessment, transaction and integration risks. We also identified a factor that describes risks as reproducible and non-producible. This study comprises an analysis of the character of risks manifestation at various stages of the integration process and provides a substantiation for introduction of the additional tool to manage mergers and acquisitions risks, and the need to supplement the common methods of risk management with an additional effective tool to mitigate negative impact of unmanageable (difficult to manage) risks of mature integration.

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