Development of a Protection System Against Hostile Mergers and Acquisitions

The effective development of the economy depends on the level of competition. The development of a system of protection against hostile mergers and acquisitions contributes to the creation of a highly competitive environment, forms more comfortable conditions for business. In this study, the author aims to develop this protection system through the use of a two-class system of a company’s equity capital formation. At present, in the Russian Federation, the two-class system of a company’s equity capital formation using multi-voting shares has been little studied. This allows judging about the theoretical significance of the study, since the obtained results develop the theory and instruments of financial management. The author substantiates the low interest of business angels and venture investors in protecting a young company from mergers and acquisitions, since the latter are one of the main ways for an investor to exit a young business. The author reveals that, for the first time, the element of a company’s equity capital in the form of multi-voting shares acts as an instrument of protection against mergers and acquisitions; this element does not create additional risks for founders to lose control of their business by attracting additional financing of equity capital. In this regard, the author proposes to use multivoting shares held by founders of the business as an additional instrument of protection against hostile mergers and acquisitions of young companies.

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