The advantages of corporate mergers are numerous, in which Saudi Arabia’s share of merger and acquisition services in the Middle East and North Africa, according to the number of deals, is 21.5 percent, as of September two thousand and nineteen, through two notable deals, Saudi Aramco’s acquisition of seventy percent of the Saudi Basic Industries Corporation (SABIC). ), and the Saudi British Bank.
Merger and acquisition
The merger of (SABB) and Alawwal Bank to create the third largest lender bank in the Kingdom of Saudi Arabia with assets of about seventy-seven billion US dollars.
- There was a slight decrease in the number of deals in 2019 compared to 2018, however, there was an increase in the value of deals. Saudi Arabia recorded four deals worth seventy-two billion dollars, according to Merger Market, compared to twenty deals worth eight and five of one hundred billion dollars in 2018.
- The command economy of Saudi Arabia is based on petroleum, approximately seventy-five percent of budget revenues and ninety percent of export earnings come from the oil industry.
- The oil industry constitutes about forty-five percent of the nominal GDP of the Kingdom of Saudi Arabia, and forty percent comes from the private sector.
- Saudi Vision 2030 was announced in April 2016 with the strategic goal of diversifying the kingdom’s economy to reduce the country’s dependence on oil.
In line with this objective, several reforms have been introduced, particularly in the business sector. These reforms include more flexibility for foreign investors to participate in the economy of Saudi Arabia.
In 2017, as part of Vision 2030, Saudi Arabia announced a massive project called NEOM, which involves building a new center in the desert overlooking the Red Sea, with a pledged budget of US$500 billion.
Merger And Acquisition Meaning
Both of Merger And Acquisition are corporate strategies for financing and managing dealings through the sale, purchase, division or combination of similar companies that can help any organization to grow rapidly in its sector or place of origin, or in a new field, without creating subsidiaries, new entities or using a joint venture.
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Merger and acquisition difference
The distinction between “merger” and “acquisition” is becoming increasingly blurred in different areas (particularly in terms of the economic bottom line), although it has not completely disappeared in all cases.
- Since the emergence of joint stock companies and their stability in their current legal form in the world.
- They have been seeking to dominate each other in search of an increase in size to expand activity, gain markets, increase competitiveness, and achieve profits to entice investors. By the middle of the twentieth century, this became evident in what is known as mergers and acquisitions.
Corporate Mergers
Merger in general is a union of interests between two or more companies that results in the emergence of a new entity or the establishment of one of the companies.
- Existing, but its legal entity changes, and the merger does not necessarily have to be between companies of the same type, so it is permissible for a company to merge with another of another type, whether the difference is in terms of purposes or in terms of legal entity.
The merger is either by means of consolidation by dissolving the company and transferring its funds to another existing company, or by way of mixing, which is the dissolution of two or more existing companies and the establishment of a new company to which the rights and obligations of each of the dissolved companies will be transferred.
Merger and acquisition strategies
The acquisition of companies means the financial and administrative control of one company over the activity of another company, by purchasing all or a percentage of the ordinary shares that have the right to vote in the general assembly of the acquired company.
Whether the shares were purchased in agreement with the current management or without, because the important thing is that the ratio allows acquired by the acquiring company by dominating the board of directors of the acquiring company.
Merger And Acquisition Process
This strategy emerged as a result of the rapid changes in the global economic system represented in globalization and economic freedom, removing obstacles to opening markets, establishing economic blocs, and increasing the economic and financial problems facing developing and developed countries, which led to an increase in competition between companies and an increase in the challenges faced by many companies and institutions in the world.
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Corporate Takeover Benefits
The acquisition of companies means the financial and administrative control of one company over the activity of another company, by purchasing all or a percentage of the ordinary shares that have the right to vote in the general assembly of the acquired company, whether the shares were purchased in agreement with the current management or without, because the important thing is that the ratio allows acquired by the acquiring company by dominating the board of directors of the acquiring company.
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There are also some negatives resulting from the merger or acquisition of companies
- Monopolizing the economic, health and educational sectors
- Assets undervalued due to lack of transparency and disclosure
- Its goal may be to eliminate competition
The crisis of the decline in oil prices is a vivid example of the merger and acquisition of oil companies
The crisis of falling oil prices has led oil companies, especially small ones, to acquisitions and mergers in order to confront this crisis with the least possible losses by taking advantage of their previously mentioned advantages.
The overlap and direct impact of the oil sector on all production and service sectors. For example, Imperial Energy, which is registered in London and has assets in Russia, was bought by the Indian company ONGC Videsh for 1.4 billion pounds (two billion dollars).
As for Urals Energy, which also operates in Russia, it entered into negotiations over the possibility of its acquisition by Sinopec, the second largest Chinese oil company listed on the stock exchange. It was able to buy Boren Energy in 2007 and then First Calgary Petroleum in 2008.
Examples of successful mergers and acquisitions and the most famous currently: Exxon Mobil and Disney Pixar.
Examples of the most notoriously unsuccessful mergers and acquisitions and acquisitions currently are: America Online/Time Warner and Daimler-Benz/Chrysler.
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