Cross-Border Mergers, Acquisitions and Valuations

Cross Border Mergers, Acquisition, and Valuations
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Cross Border Mergers, Acquisition, and Valuations
Introduction
Mergers and acquisitions (M&A) refers to the consolidation of companies. Two businesses merge to form one company while one business may buy out another business in the process of acquisition. There are many reasons that lead to the above two scenarios and the process happens within and beyond borders depending with the need at hand and financial muscles. According to Menapara and Pidhadia (2012), there are diverse motives leading to mergers and there are no conclusive reasons or effects of mergers after a long time of study and research. Leading companies are continually seeking to access strategic assets to give them a competitive advantage. Others are driven by the desire to be monopolies and have dominance over all others. Such intentions have seen multinationals grow their roots across the world. Other companies seek to have synergies in both local and international markets. There is also the genuine need for any business to grow big in order to ride on economies of scale which is a reserve for the few at the top of the business chain (DeYoung et al. 2009). Political, social and economic uncertainties may push companies to spread risk across many countries. Other companies have money to spend and they do not mind exploring new and existing opportunities from across the world.
Cross-border mergers and acquisitions have proven a success and failure in equal measure from past experiences with many companies. The primary goal of a merger is the desire to build a better financial performance (Erel et al. 2012). A firm will acquire another firm with reference to its brand strength in the market, improved technology innovation, and a firm with a considerable market performance. The primary goal is to gain financial leverage in market by buying value from another company that allows operations to go on even in new locations without necessarily forming a new company. The process alone of transacting and settling in different countries with diverse regulations and different cultural backgrounds has proven a daunting task. The paper seeks to explore what happens from selected case studies. Whether the process takes place within one country or across two different countries, the factors affecting both scenarios are the same. One, a firm may pay way over the actual price or might be financially handicapped after the financial transaction. Combining two corporate cultures is uncertain and laborious. In most cases, companies are forced to downsize and the human resource departments risk facing the law. Companies downsize with an effort to get economies of scale. There have been cases of two firms initially having come together separating and each trying to save its own firm. The process gets tougher when the transaction is inter-borders as the government of the acquiring firm in most cases has little or no say while the receiving government seeks to intervene from matters regarding pricing, to employment guarantees for her citizens, to favoritism issues. The process at this stage is so hard and successfully completing it is enough indication of a company strong enough to beat any cha...