Their attorneys have great experience with high tech start-ups and were able to offer a highly competitive service plan while not sacrificing a bit of their quality of services. CTEI may promote positive emotions and behaviors that lead to success, and minimize negative ones that waste company resources. Cultural values create a commonality among its members in how they interpret and subsequently respond to emotional issues. One of the most critical involves the valuation and transfer of tangible and intangible assets. Cross-border mergers and acquisitions: what are the legal issues? Practitioners of cross border M&A deals encourage deregulation or diversification and liberation of the local and state owned businesses or enterprises, thus affording foreign enterprises or businesses in advanced economies to invest directly, joint venture ship or partnership or even outright take over (UNCTAD, 1999). Investors usually consider tax issues before deciding on where to invest or move their investments to. That is because of the factors Benefits The review deals with EE M&A antecedents and performance outcomes, with a focus on what new insights can be gained and what new research directions are revealed. To find out if they show difference through the Shareholder wealth accretion is difficult to predict under most circumstances (Doukas and Kan, 2006; Cartwright and Schoenberg, 2006) and it can become a herculean task when cast under the shadows of a financial crisis (Mody and Negishi, 2000). Existing acquisition forces the acquiring company to adjust according to the current setup. This paper addresses this gap and identifies the main findings of studies on acquisitions in and out of EE. The results are consistent with the spillover by law hypothesis. According to Ali et al (2000) and Ball et al (2000), Germany lacks in the preparation of returns such that investors or entrepreneurs request for more insight to facts from host nations outside that of the financial report. Advantages and Disadvantages of However, it has its pros and cons. To export a reference to this article please select a referencing stye below: If you are the original writer of this essay and no longer wish to have your work published on UKEssays.com then please: Our academic writing and marking services can help you! takeover transactions such as method of payment, listing status of the target company, geographic scope (cross-border vs. domestic), and industry relatedness of the bidding and the target company, amongst other factors. How Your Company Can Benefit From Cross-border M&A (1994) and Desai et al. On the other hand, Brownfield investment compulsorily takes place on the existing facilities. However, to our knowledge, very little attention has been given to the business evaluation process as an influencing factor. It is important to note that cross-border acquisitions and mergers are not, however, without pitfalls. This report concludes with a short summary of advantages and disadvantages of both share and asset purchases. MERGERS Dedicated to your worth and value as a human being! The primary forces of change in the global competitive environment technological change, regulatory change, and capital market change create new business opportunities for MNEs, which they pursue aggressively. DG Internal Market and Services April 2005 IPM survey on obstacles to cross-border mergers and acquisitions 2 In its present form, the paper does not distinguish between those obstacles that are key to explain lagging cross-border consolidation, and those of a more Greenfield Investment: Meaning, Advantages, Disadvantages (1990), Servaes et al. WebAdvantages (Pros) of M&A Fastest way to achieve growth Enables companies to enter new markets Enables companies to change their business model Can be used to acquire new 10 Major Pros & Cons of Mergers & Acquisitions Research in International Business and Finance. Also Read: International Business Strategy All You Need to Know. While there are several potential advantages to cross-border listings, such as increased access to capital and the ability to tap into new investor pools, there are also several disadvantages to consider. Originality/value If you need assistance with writing your essay, our professional essay writing service is here to help! bank regulation and governance. For example, this can happen if the owner of the new larger company lacks the control required to run a bigger company. We've received widespread press coverage since 2003, Your UKEssays purchase is secure and we're rated 4.4/5 on reviews.io. The author finds that a country-level factor (institutional distance), an industry-level factor (industry unrelatedness) and a firm-level factor (board concentration) have significant impact on ownership participation in cross-border M&As. It often becomes a very costly affair. We provide a detailed review of the many related but distinct constructs that have been introduced to the literature. We thus propose that a host-countrys institutional laws and regulatory system, accounting and tax provisions, economic performance, financial markets development, investor protection, geographical, political and cultural factors distinctly affect cross-border acquisitions completion. Radebaugh et al (1997), Choi et al (1991) and Land et al (2000) all confirmed the differences in the way financial statements are prepared in US, UK and other European countries with makes it difficult for entrepreneurs to understand and compare with similar statements (profit and loss) within sector. The advantage of merger is that the takeover through a merger is simpler and cheaper compared to the other takeovers while the merger's shortcomings are that there must be approval from the shareholders of each company, whereas to obtain the agreement requires a long time. The bidder's governance effectiveness is measured as the extent to which board characteristics They took time to understand our technology and provided value added services by introducing investors and job candidates to us. After receiving the investment bank tender, you should pay attention to the following points: WebIt has been recognized that Cross border merger and acquisition has numerous advantages but also there is high risk of failure. Mergers Acquisitions The results reported in this thesis show marked differences for both market valuation effects and post-merger financial performance between bank mergers in Europe and the US. The Chase Law Group, LLC | 1447 York Road, Suite 505 | Lutherville, MD 21093 | (410) 790-4003, Easements and Related Real Property Agreements. For some countries among emerging economies, the host government creates its own standards which differs from that of developed economies for example United States where private sectors and the Government set up GAAP with other principals and standards. The center focus of this type of investment is generally developing countries. Cross-border Mergers and Acquisitions - CivilServiceIndia Thus, European bidding banks realise positive abnormal returns over the announcement period and small Even for some top executives, for fear losing their jobs become uncooperative when it comes to merger and takeover talks. SIGNIFICANT ADVANTAGES OF CROSS-BORDER MERGER AND ACQUISITION. In the process of businesses creating or building shareholder value, they the management are motivated to undertake cross border mergers and acquisitions in other to expand their operations which will then generate greater profits or potential for owners (shareholder) value creation than that of internal growth. A number of stakeholder issues emerge in this context: Investors have to consider IP issues in their growth strategies and conduct appropriate due diligence reviews. Although numerous studies analyze mergers and acquisitions (M&As) in and out of developed economies (DE), a much smaller number of studies focus on M&As in and out of emerging economies (EE). What are the Legal Issues In Cross-Border Mergers And Acquisitions? This is particularly the, The United Kingdom (UK) and Continental Europe are two of the most dynamic markets for mergers and acquisitions (M&As) in the world. Our research deals with Mergers and Acquisitions and the strategies which can ensure successful integration. The marriage between the organizations has an impact on the strategic, financial and managerial aspects of business. Extensive research on a company's past and its brushes with the legal system is an important factor an organisation should take into consideration before going ahead with the deal. It's a lengthy process, and the companies involved have to jump through many hoops and obtain a lot of approvals like stakeholders, the board of directors of the merging companies, the shareholders, the National Company Law Tribunal (NCLT), etc. Mergers and acquisitions are two words that are usually used synonymously. Although international mergers and acquisitions constitute the most frequently used means through which multinational corporations undertake foreign direct investment, the majority of these transactions are not successful. document.getElementById( "ak_js_1" ).setAttribute( "value", ( new Date() ).getTime() ); Financial Management Concepts In Layman Terms, Copyright 2009-2023 eFinanceManagement.com, Types of International Business Advantages and Disadvantages, International Market Lucrative But Challenging As Well, Advantages and Disadvantages of Multidomestic Strategy, Economic Investment vs Financial Investment All You Need to Know, Advantages and Disadvantages of International Business, Greenfield Investment Vs. Mergers and Acquisitions, Real-Life Examples Greenfield Investments, International Business Strategy All You Need to Know, High-low Method Accounting Meaning, Formula, Example and More, Difference between Financial and Management Accounting, Difference between Hire Purchase vs. Design/methodology/approach I am the founder of a bioinformatics start-up in the Silicon Valley and chose SAC Attorneys LLP as our corporate counsels. (2000) agreed with the above statement with emphasis on minority shareholders whilst the rights of creditors should be enforced when firms default in their payments after notices are served. However, the case for investigating the performance effects of M&A outside the US seems compelling given significant structural, legal and regulatory differences between the US and many European banking sectors. The maintenance cost of the new plant is comparatively lower than the maintenance cost of the existing plant. The following are a few advantages of cross-border business: More quickly than if a company decide to launch a new business, the company can expand into new markets. Lacking a good motive for the acquisition WebThe advantage and disadvantages of merger and acquisition are depending of the new companies short term and long term strategies and efforts. We hired James Cai and his law firm, SAC Attorneys LLP. Developing countries encourage this type of FDI by giving subsidies and tax benefits. All rights reserved. The results from this movement by the larger companies will better advance the economies of these target countries where the small firms are located for which takeover occurred since the cost involved in business transaction will be drastically reduced due to the size and capital base of these larger firms. Recent developments Implementation of ATAD has presented major changes to the Finnish tax law, especially to the earnings-stripping rules that govern the deductibility of interest costs. According to Razin et al (1998), low level of taxes or incentives in some European Union (EU) countries, prompted Investors within UK, to move their production wing of their firms from the UK to E U countries in order for these firms to enjoy stronger market positions. Please do not include any confidential or sensitive information in a contact form, text message, or voicemail. Although cross-border Mergers and Acquisitions are common, there are difficulties, particularly complex tax laws and legal/regulatory obstacles. Greenfield investors stay for the long term and focus on the growth of the company, along with its profitability. Companies combine to scale up exponentially, get a competitive advantage, or step into a new economy without starting afresh. The following are some of the disadvantages of mergers and acquisitions; When two companies doing the same activities come together and become one company, it might mean duplication and over capability within the company, which might lead to retrenchments. You can request the full-text of this chapter directly from the authors on ResearchGate. Design/methodology/approach The synergy that occurs as a result of a merger of business bias in the form of ups and downs of economic questions, and financial synergy in the form of capital increase. Horizontal acquisitions (often called horizontal mergers) involve Advantages and Disadvantages As with most countries, local companies enjoy tax reliefs or exemptions for awhile whilst foreign companies are made to pay income tax on their local business enterprise as well as foreign income tax. And it fulfills the need for the technology as well as funding. 590). Benefits Disclaimer: This is an example of a student written essay.Click here for sample essays written by our professional writers. The following are some of the disadvantages of mergers and acquisitions; Job Losses When two companies doing the same activities come together and become Numerous scholars have presented this issue. This alliance can be due to various strategic factors like increasing market share, reducing competition, diversification etc. And their new Chief Executive Kyle Whitehill indicates that further restructuring is necessary to ensure that the company is able to deliver prudent returns Source: Joy Business/Myjoyonline.com/Ghana (July 29, 2010). However, the author did not finds the support for the relationship between ownership participation and cultural distance. There is also a large variation in cultures and legal systems within Africa. They are not allowed to interfere in day-to-day operating activities or even in important decisions. And last but not the least, there must be fair treatment within the confines of the laws or regulations with respect to company directors (Executive and non executive directors). funds from Apollo Management as compensation for Apollo's Hexion Specialty Chemicals' termination of its planned takeover of Huntsman. WebKey Takeaways. 31,194,517 articles and books. Cross It empowers global transferring of technology, goods and services and integrates it for overall networking. Mr. Cai is also very conscientious of fees and costs, and avoided unnecessary charges. FPI investors are only concerned with their profit shares. increases in post-merger performance in the years following a merger. The Czech Republic government has provided subsidies and tax benefits. Save my name, email, and website in this browser for the next time I comment. (2004) pg. Taken together, our results indicate that relatedness is a multidimensional metric composed of several interrelated components, and, thus, single-dimensional proxies are not sufficient to capture relatedness accurately and completely. In other words it aids in its saturation into new areas or segments of other markets with no restrictions whatsoever and in addition access credit facilities whilst enjoying tax rebates reserved for local businesses. Closing the deal: Once all the approvals are obtained, the companies can exchange shares, trade assets, and fulfil any other legal obligations. Cross Advantages of asset purchases The full purchase price can be depreciated or amortized for tax purposes (including acquired goodwill). Businesses like banks and stores according to Hannan et al (2007) would always want to take their services and operations to the door steps of the clients, thus concentrating on high streets and other prime locations to better meet their clients need as can be attested in the United Kingdom (UK). Plus, It has already proven to be beneficial, too. In the words of Hannan et al (2007) a lot of mergers and cross border acquisition happen due to the challenges businesses go through in sourcing for more funds or capital to expand their businesses. Researches demonstrate that the failure This paper builds on previous work published in Mergers & Acquisitions Review (Farhadi et al, 2009). Take, for example, the Tata and Corus merger. There are majorly two ways to enter a foreign market, i.e., Foreign Direct Investment (FDI) or Foreign Portfolio Investment (FPI). improve bank merger outcomes in Europe and the US. If regulation and governance are substitutes, one may expect that, to the extent that monitoring by shareholders restricts managerial discretion and its potentially negative effects on shareholder wealth, stricter regulation is associated with less effective Huntsman has received $1 billion in settlement, Merger and Acquisitions have been on the rise since the last three decades and as such have attracted considerable attention from the research community. This article presents a case study of Lenovos acquisition of IBMs PC division with a focus on inventor productivity after acquisition. WebMergers, Acquisitions, and Other Restructuring Activities Jan 29 2023 Dr. Donald DePamphilis explains the real-world of mergers, acquisitions, and restructuring based on his academic knowledge behind them, including cross-border transactions. Getting approval: After the agreement is drafted, it is presented to the board, and if they are satisfied with the partnership, they approve the merger through majority votes. Managing the aftermath of cross-border merger and acquisition process is normally characterised by retrenchment to achieve economies of scale and scope in overhead duties or functions. of cross Hence, this strategy is adopted by the countries to channelize investments in specific areas. Mergers and acquisitions can be essential tools for corporate growth and restructuring. Conglomerate Merger: A conglomerate merger is a merger between firms that are involved in totally unrelated business activities . This strategy can be successful if proper planning & long-term investments are made. The contact form sends information by non-encrypted email, which is not secure. Cross These investments consume a lot of time for the parent company. We're here to answer any questions you have about our services. We were able to file a compelling complaint within a week and forced the opposing party, which was represented by one of the largest law firms in California, to make a substantial settlement offer shortly thereafter. A cross-border merger between Indian and international businesses under the Companies Act 2013 is a convoluted and long-drawn process. We based our research on the literature available on the secondary research. Culturally Tuned Emotional Intelligence: A Tripartite Cultural Analysis, Successfully Managing International Mergers and Acquisitions: A Descriptive Framework, Legal Aspects of Merging Limited Liability Companies in Company Law by Merger, The Impact of the Financial Crisis on the Performance of European Acquisitions, The Impact of Culture on Mergers and Acquisitions: A Third of a Century of Research, Mergers and acquisitions in and out of emerging economies, International Corporate Governance Spillovers: Evidence from Cross-Border Mergers and Acquisitions, Mergers & Acquisitions - Integration Strategies. This will be of interest particularly for those companies that are interested in investing in Germany based companies and the DAX 30 group of companies sometimes referred to as Deutschland AG. Buoyant mergers and acquisitions can serve as a powerful tool for growth and survival in the global economy. Also the preparation of final accounts might differ from country to country thus it is advised that there must be consistency in its preparation among subsidiaries of that holding company for easy comprehension. Not having a helping hand in a complex process such as this can seem a bit overwhelming. Comparison of Advantages and Disadvantages of Cross. It is like establishing a completely new venture. R&H has filed a lawsuit to force Dow to complete its proposed $18.8-billion acquisition of R&H. And this particularly involves transnational firms such as HSBC, British Petroleum (BP), Vodafone and Shell for example taking over companies or businesses in other countries by parting away with huge sums of money. The merging of companies is not simple or straightforward process. A merger or an acquisition may result in a business expanding geographically, which would, in turn, increase the business's ability to distribute goods or services to more people. The acquisition of Corus Steel gave Tata a steady foothold in the European market and helped them become one of the largest steel manufacturers globally. Another point worth considering in this determinant of cross border acquisition and merger is Taxation. Lastly, the process of merging two companies or acquiring a company takes time and requires energy and money. They Took Time to Understand Our Technology. Another area worth considering is disclosure policy pertaining to corporate governance. HOW CROSS BORDER MERGERS AND ACQUISITIONS ARE DETERMINED. The creation of the European Union (EU) internal market on 31 December 1992 (which seeks to remove trade barriers among member nations) brought about influx of US, Japanese and EU companies holding market positions in EU. It boosts the earning capabilities of the parent company. Many a times, investors favour or decide on nations where the tax laws and policies are relaxed thus favouring their cause in terms of releasing their investment back with maximum gain. The Investor needs to stay for a long to get its Return on Investment back. It should not be treated as authoritative or accurate when considering investments or other financial products. The parent company can install modern equipment and manufacturing techniques. to targets, the results reported in this thesis are consistent with the view that the level of investor protection enjoyed by target bank shareholders partly explains why mergers attract different market reactions across countries. It is particularly interesting that performance improvements for European banks are most pronounced for cross-border and product diversifying M&A-two types of M&A about whose performance effects the US-based literature is most sceptical. Cross border M&As leads to economies of scale and also scope, which helps in gaining expertise. To date, conclusions about the performance implications of acquisition activities are almost exclusively derived from a US market context. Global FDI increased by 38% to $1.8 trillion, a record high since the 2008 financial crisis. When this happens, a new corporate identity will adopted thus both companies will drop their old or individual identities and put on the new one after an agreement has been reached amongst the parties involved. The Companies Act of 2013 provides a comprehensive framework for M&A transactions in India, covering procedural requirements, approvals, and regulations to ensure transparency, fairness, and protection of stakeholders' interests. A great market share is good for a business, but it can be bad for consumers. This type of FDI investment occurs when the parent company is unable to find prospective acquisition targets. WebThe high relevance of cross-border M&As is a result of the major advantages associated with this strategy. One disadvantage of cross-border listings is the increased cost and complexity of the process. In contrast, related in-state mergers seem to be associated with a significantly negative market reaction. The success rate of cross-border mergers is very low. Our discussion provides several opportunities to foster the needed consolidation of this research. We also provide a synopsis of earlier studies addressing the diversification motive in M&A decision. This paper also develops propositions regarding EE M&A antecedents and performance. A merger is the strategy of choice for many business owners, regardless of their goals, whether to scale and grow, reduce expenses, get access to new markets, or eliminate a rival. Unsuccessful mergers can be result of a number of reasons. By acquiring existing ventures or merging with partner firms, a company can obtain quick access to new markets and rapidly build their presence in the host country. However, the results reported in this thesis suggest that board characteristics such as independence, diversity and board leadership structure play a role in improving bank M&A in the US, but not in Europe. Challenges Greenfield investors earn more than Brownfield investors. For instance the flow of foreign direct investment to a transition host nation will boost its foreign reserves (Gross domestic product). All work is written to order. The outcome of this is unproductiveness among employees of the target company who fear of losing their jobs or been laid off. In our contribution, we introduce the IP rights applicable in Germany. Both companies have to do an in-depth SWOT analysis of the other party to evaluate how beneficial the merger will be for them. US banks, on the other hand, expand both on- and off-balance sheet activities in the post-merger period, but simultaneously appear to suffer from deteriorating post-merger efficiency levels. Merging corporate cultures between a local firm and an overseas one becomes a problem since regulations for example like governance practices might differ from country to country.