Mergers and Acquisitions: Examples of Best Practice in Europe and Latvia

Abstract

This study aims to research examples of mergers and acquisitions of European and Latvian dairy firms, the motivation for these transactions and their results, and to show that mergers and acquisitions had a positive impact on the development of the dairy industry overall and on specific firms by increasing their competitiveness.

The authors analyze the reasons for, as well as the meaning and impact of, mergers and acquisitions on firm development, focusing on the example of dairy companies in Europe, and subsequently on these processes in Latvian dairy industry.

The study is based on the qualitative and quantitative analysis of firm financial reports as well as reports of the International Dairy Federation, publications of the United Nations Food and Agriculture Organization, annual reports of the International Farm Comparison Network, reports on the dairy industry in the European Union, Latvian Central Union of Dairy Producers, Lursoft firm registry data, as well as reports of the Ministry of Agriculture, and Latvian Farm Consultation and Education center.

The study relies on statistical comparisons of firm operations before mergers or acquisitions as well as during the process and afterwards. This allows identifying the impact of mergers itself on particular firms or the industry, while abstracting from exogenous factors. Mergers and acquisitions in Latvian dairy industry had begun in 2011 and continued until 2013. However, the geopolitical situation in Europe in 2015 had fully offset the positive impact of this process. The deterioration in the geopolitical climate due to developments in Russian–Ukrainian relations has had a big impact on the economic processes affecting the development strategy of dairy firms.

This study finds that often the problems of firm development are related to the lack of financial management especially deficiencies in decision making about firm mergers and acquisitions.

Historical and statistical analysis as well as comparisons of successful experiences in Europe and Latvia allows the authors to conclude that in evaluating decisions on the possibilities for mergers and acquisitions Latvian firms have to be guided by the most important results of this process: possible increases in foreign direct investment and the growth in market share. This will, in turn, give the firms an opportunity to acquire new technologies, reorganize manufacturing processes, and start producing goods with larger value added. Ultimately, this will allow increasing firm values.

Citation

Saksonova, S. and Kantāne, I. (2016), "Mergers and Acquisitions: Examples of Best Practice in Europe and Latvia", Contemporary Issues in Finance: Current Challenges from Across Europe (Contemporary Studies in Economic and Financial Analysis, Vol. 98), Emerald Group Publishing Limited, Leeds, pp. 95-110. https://doi.org/10.1108/S1569-375920160000098007