Electronic Journal of Polish Agricultural Universities (EJPAU) founded by all Polish Agriculture Universities presents original papers and review articles relevant to all aspects of agricultural sciences. It is target for persons working both in science and industry,regulatory agencies or teaching in agricultural sector. Covered by IFIS Publishing (Food Science and Technology Abstracts), ELSEVIER Science - Food Science and Technology Program, CAS USA (Chemical Abstracts), CABI Publishing UK and ALPSP (Association of Learned and Professional Society Publisher - full membership). Presented in the Master List of Thomson ISI.
Volume 8
Issue 2
Available Online: http://www.ejpau.media.pl/volume8/issue2/art-26.html


Jakub Kraciuk
Department of Agricultural Economics and International Economic Relations, Warsaw Agricultural University, Poland



Major results of economic globalisation are concentration processes, which take place in the world economy. In the paper there were shown such main forms of concentration as fusions and takeovers. Their types and consequences (often negative ones) for joining transnational corporations were also presented. The second part of the article shows development of these forms of concentration in the world and in Poland, their quantity and value as well as the largest transactions of fusions and takeovers, which happened last years. Analysis confirms the fact that though the most of transactions finish as failures, there still has been large interest of corporations to be joined. Moreover, after down tendency last years, new rising tendency of these forms of concentrations is beginning.

Key words: fusion, takeover, globalisation.


Globalisation processes occurring in world economy makes firms use various development strategies to remain on the market. These strategies can take on the character of internal as well as external development. Effects of an external development are various types of cooperation with other firms within cooperative relations or different forms of ownership relations. Among many activities leading to a firm´s increase of its reserves and capital as well as to enlargement of its competitiveness, there are, above all, takeovers and fusions.

At present, takeovers and fusions are a constant element of economy, not only in the developed countries, but also Asiatic countries as well as Central and Eastern European countries and their value amounts several thousands billion every year. It causes, in a large extent, acceleration of concentration processes in world economy. From 1990, many foreign firms, above all - transnational corporations, have been carrying on investment expansion on Polish market, mainly by fusions of Polish enterprises as a result of privatisation processes.

The aim of the paper was to present some of the most important types of concentration - takeovers and fusions, as well as a development of these forms in Poland and in the world.


Takeovers and fusions are two of potential ways of enterprises´ development. They became popular, when, as a result of economy´s globalisation and abolishment of barriers in international trade, competitiveness on international and domestic sales markets was improved [3]. Takeovers and fusions allow irregular enlargement of an enterprise´s potential; they are also one of the fastest forms of entering the other country´s market.

A fusion depends on uniting two independent enterprises, which share their reserves to gain their common aims. A characteristic feature of a fusion is voluntary action of partners, which are usually similar in a size. Fusion can take following forms [6]:

A takeover is a purchase of some amount of an enterprise´s stocks, which would allow other firm to take over control of the enterprise. As a result, the purchased enterprise is included in the taking-over firm´s structure. The main characteristics of takeover, which differ it from fusion is fact, that a firm, which is taken over, do not lose its legal entity. Takeover could be friendly or hostile. Friendly takeover takes place as a result of both firms´ negotiation - boards, councils. The aim of these negotiations is to establish conditions of takeover, which then must be accepted by owners of the firms in the form of resolutions of partners or genera meetings of stakeholders. Hostile takeover means that bodies of a firm, which is taken over, take some actions to defend themselves from the takeover. As a result of hostile takeover attempts, apart from technical problems there is very often an opposition, especially from top management personnel of the taken over enterprise.

Fusions and takeovers appear in growing, developed, embryonic and final sectors. In the growing and embryonic sectors, their driving force is aspiration to achieve strong competitive worldwide position. In the developed and final sectors, excess of production abilities causes fusions and takeovers.

However, fusions and takeovers do not always bring benefits to the firms. According to data presented at The World Economic Forum in Davos in 2000, from 60% to 80% of all mergers cause disappointments and about 60% are followed by negative effects [11].

According to "Fortune", key reasons of fusions and takeovers´ failures come from [7, 11]:

Effects of fusions and takeovers are strongly diverse in particular branches. They usually lead to improvement of trade branch results. Interest in these operations is strong also in pharmaceutics branch, because research and development works on new medicaments are very expensive and they usually can be only financed by huge concerns. Some corporations (Toyota, Honda, Porsche, BASF or Bayer) present highly sceptic attitude towards fusions and takeovers, whereas others (General Electric, Unilever, Cisco or Tyco) have been systematically increasing their market shares by purchasing other firms, at the same time improving their profitability and share rates. They have also gained huge abilities in searching for appropriate occasions and integrating the taken firms. The concerns known for successful takeovers usually leave almost complete freedom of activity to the purchased firms. Obviously, they create them clear financial aims, but they hardly interfere in the way of reaching these aims. However, before the transaction is completed, the concerns discern very precisely the situation and the model of management in the firm. When the firm gets unambiguously positive opinion, it usually does not matter much if the price seems to be extortionate [2].


Intensification of concentration processes in the world in form of fusions and takeovers took place in the second half of 90´s and in 2000 gained maximum value of more than 3.5 billion USD. In the first half-year of 2000 the value of fusions and takeovers exceeded 2 billion USD with 17 thousand transactions (graph 1).

Graph 1. Takeovers and fusions in the world in 1997-2004 (Transactions finished before December 31st 2004. Analysis does not include privatisations)
Source: Dealogic 2004

However, following years brought considerable fall of the transactions´ value. The reason of such fall was, above all, deterioration of prosperity on the world markets. Payment abilities of many firms, also transnational corporations, became worse and they could not complete larger transactions, taking over only smaller firms. Moreover, low value of shares on international stocks made them rarely use to calculate fusions and takeovers [10]. In 2003 numerous factors appeared which impeded development of global market of fusions and takeovers: the war in Iraq, epidemic of SARS and other viruses, further stagnation in the world economy or threat of terrorism. However, the second half of 2003 showed visible symptoms of a boom, what confirmed the data of 2004. In the second half of 2004 there appeared visible increase of fusions and takeovers value. At the same time, there was fall of number of transactions and increase of average transaction value.

In the world structure of fusions and takeovers´ value two regions dominate - North America and Western Europe. These regions take more than 70% of the world value of fusions and takeovers. However, in the longer term, there is small percentage fall in comparison to the other regions (graph 2).

Graph 2. Structure of values of announced transactions of fusions and takeovers
Source: own elaboration based on [10] and Dealogic 2004

Analysis of the largest world fusions and takeovers of the previous year presents the domination of American corporations, even though the largest transaction, which amounted almost 67 milliard USD, concerned a merger of French firms Sanofi-Synthelabo and Aventis.

Table 1. Top ten global deals 2004 (Completed deals from 1 January until 29 November 2004. The analysis excludes privatisations and recapitalisations)



Bidder Nationality


Target Nationality

Completion Date

Bid Value US $m






30 Jul 2004



JP Morgan

United States

Chase Bank One

United States

1 Jul 2004



Bank of America

United States

Fleet Boston Financial

United States

1 Apr 2004



Cingular Wireless

United States

AT&T Wireless Services Inc

United States

26 Oct 2004



St Paul Cos

United States

Travellers Property Casualty

United States

1 Apr 2004



Banco Santander Central Hispano


Abbey National

United Kingdom

12 Nov 2004




United States


United States

1 Nov 2004



Manulife Financial


John Hancock Financial Services

United States

28 Apr 2004



General Electric

United States

Vivendi Universal Entertainment (80% interest)

United States

12 May 2004



Royal Bank of Scotland Group

United Kingdom

Charter One Financial

United States

31 Aug 2004


Source: Dealogic 2004


In Poland fusions and takeovers are also a part of economics process. However, the total value of these transactions in relation to GNP (gross national product) is low (it depends on a year and amounts from 1% to 4%). In the USA it amounts about 30%, whereas in Western Europe - from 15% to 25%.

In 2003 in Poland were revealed 245 fusions and takeovers in comparison to 259 transactions in 2002. Moreover, estimated value of the market decreased from 3.1 milliard USD in 2002 to 2.9 milliard USD in 2003 [8].

Graph 3. Fusions and takeovers in Poland in 2000-2004
Source: own elaboration based on data of Pricewaterhouse Coopers (PwC) and KPMG Poland

Until the end of November 2004 in Poland 167 transactions had been completed and their total value amounted about 2.8 milliard USD. Characteristic for present fusions and takeovers is systematic increase of Polish investors´ capital participation in these transactions. In transnational fusions and takeovers stated 63% of all takeovers. Year 2004 was the first when transnational transactions were in the minority - only 40% of the total number. Domestic fusions and takeovers were the majority. Such change can be explained by intensification of consolidation processes on Polish market. Even managers of the best Polish firms understood, that their enterprises are diminutive on the European scale and the best defence against a possible takeover is an attack. According to the Dealogic data, consolidation processes became stronger, particularly in sectors, which are the most fragmented, i.e. informatics, construction and food industries [9]. Furthermore, average value of transactions made by domestic investors was almost twice larger than by foreign investors and amounted about 30 million USD. In previous years, there were only several millions USD invested by national investors. However, eleven months is too short period to state, if this radical shift towards Polish investors have stable character. Although, their growing participation in concentration processes shows that they have been treating these activities as defence against international competitiveness [5].

The most active foreign investors in Poland were French enterprises (13 takeovers of Polish firms), German (11 transactions), British and American (10 transactions each). In 2003 the greatest number of transactions (66) was revealed in manufacturing sector, in financial services sector and IT (30 transactions each) and in food industry (29 transactions). According to the total value of transactions, the leader was the financial services sector with more than 641 million USD of revealed transactions.

Graph 4. Structure of sectors according to the number of transactions of fusions and takeovers in 2003
Source: [8]

Within four the largest consolidation transactions in Polish economy, two of them concerned financial services and two other - media. The largest transaction closed last year was ITI Holding´s takeover of 30.4% shares of TVN - value of the transaction exceeded 148 million USD.

Table 2. List of the largest transactions of fusions and takeovers in Poland in 2003



Investor´s nationality


Value of transaction [millions USD]


ITI Holding took over 30.4% of shares in TV station TVN





Bank KBC increased its participation in insurance company Warta S.A. z 51% do 75%


Financial services



Consortium of three funds: private equity - Hicks Muse Tate & Furst Inc., Emerging Markets Partnership and Argus Capital Partners - took over assets of Elektrim S.A. (cable Aster City TV operator)





Basell NV increased its participation in company Poliolefiny Polska Sp. z o.o., dependent on Orlen (joint-venture)

The Nederland

Chemistry and pharmacy


Source: [8]

Development perspectives in the following years in Poland on fusions and takeovers market are very optimistic. It is expected that extended interest of consolidation in particular sectors, visible economic growth and accession to EU would impact on increase of activity on Polish market of fusions and takeovers. From the beginning of 2004, Polish entrepreneurships have had to be prepared for strong competitiveness of Western firms, what would probably increase consolidation tendencies much more. Moreover, Poland as a member of the European Union has been better evaluated, what would reduce an investment risk and encourage new investors that were not interested in our country before.


Fusions and takeovers are a result of globalisation and new technologies development, what makes management of a large organization much easier.

Although consolidation processes have been taking place and they will be, they do not bring only profits. In Poland as well as in the global scale, about 70-80% of all consolidation transactions are not successful. There are two main reasons: incorrectly defined business strategy before the fusion and unrealistic evaluation of potential and profits from synergies, which are to be a result of fusion or takeover. To sum up, it is questionable, if this form of concentration, which is reaction of Polish forms on globalisation process and transnational corporations expansion on our market, is the most correct way of competitiveness improvement and if it is enough for our firms to compete effectively with global firms.


  1. Analiza fuzji i przejęć w 2003 Europa Środkowo-Wschodnia [Analysis of fusions and takeovers in 2003. Central-Eastern Europe] [in:] http://www.pwc.com/pl/pol/ins-sol/publ/2004/ma_survey_2003.pdf [in Polish]

  2. Bożyk P. (ed.), 2003: Egzemplifikacja międzynarodowych stosunków gospodarczych [Exemplification of international economic relations], WSHiP, Warsaw [in Polish]

  3. Cichocki T., 1999: Rola banku na rynku fuzji i przejęć [Role of a bank on fusions and takeovers market], "Bank i Kredyt", December 1999 [in Polish]

  4. Dubicki M., 2000: Jak odnieść sukces w operacjach fuzji i przejęć przedsiębiorstw [How to make a success in operations of fusions and takeovers of enterprises], "Bank i Kredyt", styczeń - luty 2000 [in Polish]

  5. Fuzje i przejęcia w Polsce [Fusions and takeovers in Poland], Parkiet 24.06.2004 [in Polish]

  6. Gębski Ł., 1998: Fuzje i wykupy [Fusions and takeovers], Gdańska Akademia Bankowa [in Polish]

  7. Knap E., 2001: Determinanty powodzenia transakcji fuzji i przejęć [Determinants of success of fusions and takeovers], Ekonomika i Organizacja Przedsiębiorstwa nr 11/2001 [in Polish]

  8. Marzec D., 2004: Badanie dotyczące transakcji kapitałowych w Europie Środkowo-Wschodniej [Research concerning capital transactions in Central-Eastern Europe], PWC Warsaw [in Polish]

  9. Mayer B., 2004: Zaczęło się wielkie polowanie [Great hunting has started], Parkiet 16.12.2004 [in Polish]

  10. Mergers & Acquisitions weltweit, http://www.acquisition.de/fakten1020.htm#weltrekord

  11. Rekordowa fala połączeń przedsiębiorstw [Record number of enterprises´ mergers], Zarządzanie na Świecie nr 5/2000 [in Polish]

Jakub Kraciuk
Department of Agricultural Economics and International Economic Relations,
Warsaw Agricultural University, Poland
166 Nowoursynowska Street, 02-787 Warsaw, Poland
email: kuba.kraciuk@wp.pl

Responses to this article, comments are invited and should be submitted within three months of the publication of the article. If accepted for publication, they will be published in the chapter headed 'Discussions' and hyperlinked to the article.