Organizational and economic tools for assessing and improving the efficiency of economic activity in mergers and acquisitions of vertically integrated industrial holdings

The study is aimed at improving the efficiency of economic activity in vertically integrated industrial holdings. Special attention is paid to analyzing socio-economic relationships emerging in the process of evaluating the effectiveness and implementation of mergers and acquisitions (M&A, Mergers & Acquisitions). The attention is focused on the specific behavioral risk – Fear of Missing Out (FoMO) – which deforms the rational business processes of making economic decisions on making inefficient deals during periods of industry transformation. The study uses methods of system analysis and synthesis to identify the relationship between the signs of FoMO and long-term business performance. The approbation was carried out on the basis of 63 mining and metallurgical sector transactions. The assessment of the efficiency of economic activity after the consolidation of assets was carried out using the author’s methodology of “medium-term payback” based on the dynamics of EBITDA indicator within 4 years after the completion of the transaction. The authors have developed a complex risk indicator (RIF, Risk Indicator Factor) that includes monitoring of transaction dynamics, investor sentiment, cross-border activity, and price trends. It has been proved that when the indicator reaches critical values, it signals a decrease in the quality of business processes and an increase in the likelihood of concluding “extra unprofitable” transactions. The authors have suggested an algorithm of modification of corporate risk management procedures which includes creation of independent “opposition to the deal” groups and implementation of alternative scenarios within the discounted cash flow models. Introduction of the proposed economic tool set into the business processes of industrial holdings allows minimizing irrational factors in management. Practical use of the RIF indicator by boards of directors of industrial enterprises ensures improvement of their economic activity in mergers and acquisitions in the long-term perspective by preventing possible destructive integration processes.

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