Abstract
This research paper studies the impact of domestic Russian mergers and acquisitions on the operating profit margin of companies participating in deals. The goal of the research is to evaluate the changes in operating profit margin, and to analyse the significance of factors affecting operating profit margin after deals have been concluded.
 The main scientific contribution of this research is the development of a methodology to analyse the effect of mergers and acquisitions on operating profit margins that takes into account the idiosyncratic features of the Russian market, and which can be used with limited information for analysis of private companies. The proposed methodology is based on benchmarking the operating profit margin of companies participating in a deal against the same variable for a portfolio of similar companies.
 Based on the analysis of recent studies, several explanatory variables were proposed to explain the changes in operating profit margin after the deal. Among these were included real GDP growth, type and value of the deal, book value of assets of the target company, as well as a number of control variables. A random effects model with robust standard errors was used to test the significance of factors affecting operating profit margin. This methodology was applied to a sample of 73 domestic Russian deals observed in the period 2012-2019.
 This research makes several practical contributions to the literature. In the studied sample, deals lead to an increase of operating profit margin by 4.6% relative to the period before the deal, and 2.5% relative to the benchmark portfolio. The highest growth of operating profit margin relative to the benchmark portfolio is observed 2 years after the deal. This growth is increased by the purchase of large companies in the same industry. There is a significant negative effect of the deal value and a strong indication that buyers tend to overpay for the target companies relative to their fair value.
 This research will be of practical use for persons in management positions to estimate the value of prospective deals, and for academic researchers interested in the analysis of mergers and acquisitions in emerging markets.
Highlights
IntroductionA significant amount of assets is involved in mergers and acquisitions (M&A)
Every year, a significant amount of assets is involved in mergers and acquisitions (M&A)
This study focuses on the analysis of changes in operating performance, in particular, changes in the operating profit margin of companies involved in M&A
Summary
A significant amount of assets is involved in mergers and acquisitions (M&A). In 2019, the global M&A market amounted to USD 4.1 trillion (-0.5% y/y).. Despite the decline in global M&A activity in 2019, companies continue to use M&A to strengthen their business, enhance the scale of their operations and better position themselves in the global market. The Russian M&A market stagnated in the last 5 years. The economic sanctions against Russia adopted in March 2014 resulted in a decrease in domestic activity due to limited access to capital for many Russian companies. Low oil prices and the devaluation of the ruble at the end of 2014 further limited M&A activity. In 2019, the Russian M&A market amounted to USD 62.8 billion (670 deals), which was over two times lower than in 2012 in terms of value
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