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Article
Publication date: 1 July 2003

Michael A. Hitt and Vincenzo Pisano

Cross‐border mergers and acquisitions present significant opportunities for firms wishing to diversify their activities geographically, learn new knowledge, and gain…

Abstract

Cross‐border mergers and acquisitions present significant opportunities for firms wishing to diversify their activities geographically, learn new knowledge, and gain access to valuable resources. Cross‐border mergers and acquisitions present multiple challenges as well. These include the difficulty of evaluating target firms, cultural and institutional differences, and the liabilities of foreignness among others. We compare acquisitions to enter new markets with other market entry mechanisms (strategic alliances and greenfield ventures), and conclude with suggestions for future research to advance our knowledge of this strategy of increasing importance globally.

Details

Management Research: Journal of the Iberoamerican Academy of Management, vol. 1 no. 2
Type: Research Article
ISSN: 1536-5433

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Article
Publication date: 3 October 2016

K.S. Reddy, En Xie and Yuanyuan Huang

Drawing attention to the significant number of unsuccessful (abandoned) cross-border merger and acquisition (M&A) transactions in recent years, the purpose of this paper…

Abstract

Purpose

Drawing attention to the significant number of unsuccessful (abandoned) cross-border merger and acquisition (M&A) transactions in recent years, the purpose of this paper is to analyze three litigated cross-border inbound acquisitions that associated with an emerging economy – India, such as Vodafone-Hutchison and Bharti Airtel-MTN deals in the telecommunications industry, and Vedanta-Cairn India deal in the oil and gas exploration industry. The study intends to explore how do institutional and political environments in the host country affect the completion likelihood of cross-border acquisition negotiations.

Design/methodology/approach

Nested within the interdisciplinary framework, the study adopts a legitimate method in qualitative research, that is, case study method, and performs a unit of analysis and cross-case analysis of sample cases.

Findings

The critical analysis suggests that government officials’ erratic nature and ruling political party intervention have detrimental effects on the success of Indian-hosted cross-border deals with higher bid value, listed target firm, cash payment, and stronger government control in the target industry. The findings emerge from the cross-case analysis of sample cases contribute to the Lucas paradox – why does not capital flow from rich to poor countries and interdisciplinary M&A literature on the completion likelihood of international takeovers.

Practical implications

The findings have several implications for multinational managers who typically involve in cross-border negotiations. The causes and consequences of sample cases would help develop economy firms who intend to invest in emerging economies. The study also offers some implications of M&A for telecommunications and extractive industries.

Originality/value

Although a huge amount of extant research investigates why M&A fail to create value to the shareholders during the public announcement and post-merger stages, there is a significant dearth of research on the causes and consequences of delayed or abandoned national and international deals. The paper fills this knowledge gap by discussing an in-depth cross-case analysis of Indian-hosted cross-border acquisitions.

Details

Journal of Organizational Change Management, vol. 29 no. 6
Type: Research Article
ISSN: 0953-4814

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Article
Publication date: 16 November 2015

Vanita Tripathi and Ashu Lamba

The purpose of this paper is to determine the motives of cross-border mergers and acquisitions (M & A) by Indian companies for the period 1998 through 2009. The…

Abstract

Purpose

The purpose of this paper is to determine the motives of cross-border mergers and acquisitions (M & A) by Indian companies for the period 1998 through 2009. The study has also attempted to ascertain the post-merger paybacks realized by the sample acquirer companies. It also identifies the motives which help in improving the post-merger performance. The preference of the motives and post-merger paybacks realized across the development status of the host economy, age and industry of the company has also been found.

Design/methodology/approach

This paper uses a survey approach to collect the responses over the motives and post-merger paybacks. Statistical tools, namely, Likert scale, factor analysis, independent samples t-test and binary logistic regression have been used.

Findings

The study found that there are five motives of cross-border M & A – value creation, improvement in efficiency, market leadership, marketing and strategic motives and synergistic gains. The results also indicated that the acquirer firms expect cost and financial efficiency, stakeholders’ benefits and employee welfare post acquisition. The motive of value creation significantly improves the post-merger financial performance.

Research limitations/implications

The study has only considered the cross-border M & A but not domestic M & A.

Practical implications

The research is an attempt to understand the dynamics which are responsible for motivating Indian companies to go abroad for acquisitions. Thus, it would help the prospective Indian acquirer companies to focus on the motives which help in improving the post-merger financial performance.

Originality/value

This research paper is original as it explores the motivation of Indian companies for entering into cross-border M & A. It adds to the extant literature of cross-border M & A by emerging economies multinational enterprises.

Details

Journal of Strategy and Management, vol. 8 no. 4
Type: Research Article
ISSN: 1755-425X

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Book part
Publication date: 26 August 2014

Daniel Rottig, Taco H. Reus and Shlomo Y. Tarba

This chapter aims to make sense of the growing research that examines the role of culture in mergers and acquisitions. We provide a detailed review of the many related but…

Abstract

This chapter aims to make sense of the growing research that examines the role of culture in mergers and acquisitions. We provide a detailed review of the many related but distinct constructs that have been introduced to the literature. While each construct has contributed to our understanding of the role of culture, the lack of connections made among constructs has limited the consolidation of contributions. The review shows what these constructs mean for mergers and acquisitions, what major findings have been discovered, and, most importantly, how constructs interrelate. Our discussion provides several opportunities to foster the needed consolidation of this research.

Details

Advances in Mergers and Acquisitions
Type: Book
ISBN: 978-1-78190-836-5

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Book part
Publication date: 4 September 2007

Satu Teerikangas

Different forms of inter-organisational encounters, including joint ventures, alliances, mergers and acquisitions, have over the last decades become fashionable and

Abstract

Different forms of inter-organisational encounters, including joint ventures, alliances, mergers and acquisitions, have over the last decades become fashionable and much-sought means of globalisation. A continuous concern shared by managers involved in these different forms of inter-organisational encounters is the challenge of making them work in practice – their successful implementation and management. The cultural dimensions of these different kinds of inter-organisational encounters, particularly in cross-border contexts, have been deplored as being particularly difficult. This paper builds on prior research and aims to understand how the cultural dimensions of inter-organisational encounters have been approached by researchers on mergers and acquisitions on the one hand and researchers on alliances and joint ventures on the other hand. Based on a comparative literature review, the findings suggest that the two fields, despite their valuable contributions and the similarities in the phenomena they study, have remained surprisingly isolated from one another and would offer opportunities for cross-fertilisation. Through its theoretical contribution, the paper intends to offer insights to researchers in both streams of research.

Details

Advances in Mergers and Acquisitions
Type: Book
ISBN: 978-0-7623-1381-5

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Book part
Publication date: 14 November 2014

Yaqoub Alabdullah and Stephen P. Ferris

This study uses cross-border mergers as a test of the ability of foreign directors to provide effective strategic advising. We find that firms with foreign directors on…

Abstract

This study uses cross-border mergers as a test of the ability of foreign directors to provide effective strategic advising. We find that firms with foreign directors on their boards are more likely to engage in cross-border mergers, pursue a higher number of cross-border mergers, and invest more in those mergers. We further determine that firms with foreign directors are more likely to undertake nondiversifying mergers, enjoy friendly mergers, and acquire privately held targets. Moreover, we find that firms with foreign directors have higher announcement period returns and pay less for their cross-border targets.

Details

Corporate Governance in the US and Global Settings
Type: Book
ISBN: 978-1-78441-292-0

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Article
Publication date: 30 July 2018

Yu Li, K.S. Redding and En Xie

Given that several publicly announced international merger and acquisition deals have been abandoned in recent years, the purpose of this paper is to present a synthesis…

Abstract

Purpose

Given that several publicly announced international merger and acquisition deals have been abandoned in recent years, the purpose of this paper is to present a synthesis of influential articles that examine organizational characteristics of cross-border acquisition transactions. The synthesis is framed through general traits and resources, learning and prior acquisition experience, and top-level management and governance attributes. Specifically, the paper conceptualizes key organizational attributes influencing the propensity of cross-border negotiations, and the most common characteristics and post-deal effects by illustrating several case examples from around the world.

Design/methodology/approach

Owing to fairness and integrity principles of the literature survey studies, the paper adopts an exploratory review design to present a synthesis of several influential articles published in strategy, international business and corporate finance journals. Since case method and storytelling are the best qualitative approaches to conceptualizing extant theoretical contributions, a number of case examples—successful, delayed and abandoned—from around the world have been discussed by leveraging the case information from archival sources.

Findings

Drawing on resource-based view, organizational learning, upper echelons and agency theory perspectives, the paper underscores three observations. First, organizational characteristics such as firm age, firm size, ownership structure, slack resources, marketing resources, technological intensity, export intensity and business group affiliation have different impacts on the propensity of publicly announced cross-border deals. Second, firm’s prior acquisition experience and firm’s acquisition experience in the target country have positive or moderating effects on the success of a cross-border merger. Third, top-level management characteristics such as CEO foreign nationality and CEO international career experience, and governance characteristics such as board size, the number of independent directors and directors with overseas experience, have mixed effects on the incidence of cross-border acquisitions.

Practical implications

The paper puts forth several recommendations for top-level managers participating in cross-border acquisition negotiations, such as learning from peers in the same industry, learning from predecessors in the target country and learning from failure negotiations in the same industry and other industries.

Originality/value

Nested within the organizational, international business strategy and corporate finance literature, the paper presents a synthesis of influential publications that study organizational characteristics affecting the propensity of cross-border acquisitions. The cases discussed in this paper are unique examples from around the world.

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Article
Publication date: 29 May 2018

Yusnidah Ibrahim and Jimoh Olajide Raji

This paper aims to examine the influence of key macroeconomic factors on the inward and outward acquisition activities of six ASEAN (ASEAN: Association of Southeast Asian…

Abstract

Purpose

This paper aims to examine the influence of key macroeconomic factors on the inward and outward acquisition activities of six ASEAN (ASEAN: Association of Southeast Asian Nations) countries, namely, Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam, over the 1996-2015 period.

Design/methodology/approach

The study uses alternative panel data methods, including pooled mean group, mean group and dynamic fixed-effect estimators.

Findings

The results indicate that gross domestic product (GDP), interest rate, exchange rate, money supply and inflation rate are the most important macroeconomic factors explaining the trends of cross-border mergers and acquisition outflows of the ASEAN-6 countries. Specifically, GDP, money supply and inflation rate have significant positive relationships with acquisition outflows, while interest rate and exchange rate exert significant negative influence. On the other hand, the authors find four significant macroeconomic factors explaining the trends of the inward acquisitions. Essentially, GDP, money supply and inflation rate have significant positive impacts on inward acquisitions, while the impact of exchange rate is negatively significant.

Research limitations/implications

Unavailability of data limits this study to pool six sample countries from ASEAN, instead of ten representative member countries.

Practical implications

The results of this study can signal to firms or investors, involving in cross-border mergers and acquisitions, where to direct foreign resources flows. Moreover, having the knowledge about the relative levels of market size and other macroeconomic factors in both home and host countries can be of great importance for investment decision. Therefore, policymakers of ASEAN countries should make appropriate macroeconomic policies that can stimulate inward and outward acquisitions.

Originality/value

The main contribution of this paper is that it is the first to present the analysis of macroeconomic influences on the trends of inward and outward merger and acquisition activities in six ASEAN countries.

Details

Studies in Economics and Finance, vol. 35 no. 2
Type: Research Article
ISSN: 1086-7376

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Book part
Publication date: 26 August 2014

Kamal Ghosh Ray and Sangita Ghosh Ray

Cross-border mergers and acquisitions are now the fundamental mechanisms of globalization and considered as prime vehicles for business engagement across the countries…

Abstract

Cross-border mergers and acquisitions are now the fundamental mechanisms of globalization and considered as prime vehicles for business engagement across the countries through the foreign direct investment route. Significant amounts of foreign funds are crossing the country borders for acquisitions with the objectives of earning super normal returns. But realizing super normal returns from foreign acquisitions are far more difficult than that of foreign greenfield projects or domestic M&As or greenfield projects. The super normal profit itself is “synergy” which is the main driving force for any M&A including the cross-border one. Even though foreign policies of individual countries affect cross-border M&A decisions, corporate and market-driven financial numbers significantly influence the synergy estimation. Synergy should bring in all round greater efficiency and value addition to all stakeholders. But if the cross-border deal is not financially crafted properly, it may fall flat causing more distress to the acquirer compared to domestic acquisition. The theory of synergy is well developed which mostly applies to the domestic M&As. But due to inherent differences between cross-border and domestic M&As, the same synergy theory may not apply equally to the cross-border ones. Therefore, a different connotation of synergy is propounded in this work for cross-border M&As, which can be a corollary to the conventional theory of synergy. This alternative theory of synergy aims at helping the companies in developing their own financial strategies before making their strategic decisions for cross-border M&A deals.

Details

Advances in Mergers and Acquisitions
Type: Book
ISBN: 978-1-78190-836-5

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Book part
Publication date: 22 November 2016

Alen Sacek

Cross-border acquisitions play an important role in corporate strategic development and international expansion. During the past decades, mergers and acquisitions have…

Abstract

Cross-border acquisitions play an important role in corporate strategic development and international expansion. During the past decades, mergers and acquisitions have been intensively researched through the lenses of strategic management, corporate finance, behavioral finance, etc. Despite the intense effort, the progress made is still fragmented and lacks unifying theories that approach the entire acquisition process on the one hand, and in-depth research of critical factors on the other. The intent of the research paper is to establish a vital link between academic research and practice of mergers and acquisitions, especially regarding the pre-acquisition evaluation.

In detail, the research paper investigates critical factors – and their inclusion in the pre-acquisition due diligence, before decision about acquisition is made. Pre-acquisition due diligence theoretically conforms to organizational learning theory, which proposes the more the acquiring firm learns about the acquisition target, the higher the probability of a successful acquisition. The central hypothesis states that due diligence, including the critical factors, in the pre-acquisition phase is related to acquisition success.

Using a multidimensional measure of critical factors, the empirical evidence is based on 85 cross-border acquisitions that took place between 2007 and 2013 in the European automotive industry. The quantitative analysis finds positive association between the Choice of Strategic Partner, Business Capabilities and HR Knowledge, and Financial Factors and Acquisition Premium as critical factors of due diligence and acquisition success. The strongest relationship is between business capabilities and knowledge transfer as the main asset for realization of synergy values and successful acquisition. In this context, the valuation of the business capabilities of the acquisition targets is classified as the main challenge for reflecting suitability of the acquisition price and establishing value generation from the combined firms in the post-acquisition phase.

By studying acquisition risk and critical factors – both success and failure reasons – this research tested and proved theoretically sound framework for successful acquisition. From a practical standpoint, the research results provide acquisition management with a proven model for pre-evaluating acquisition candidates by means of comprehensive due diligence.

Details

Contemporary Issues in Finance: Current Challenges from Across Europe
Type: Book
ISBN: 978-1-78635-907-0

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