International Business Cross Border Mergers & Acquisitions Prof Bharat Nadkarni

International Business : Prof Bharat Nadkarni Mergers & Acquisitions M & A involve the combination of two organisations. The term merger refers to the integration of two previously independent organisations into a completely new organisation; Acquisition involves the purchase of one organisation by another for integration into the acquiring organisation. Organisations have a number of reasons for wanting to acquire or merge with other firms, including diversification or vertical integration; gaining access to global markets, technology, or other resources; and achieving operational efficiencies, improved innovation, or resource sharing. As a result, M&A have become a preferred method for rapid growth and strategic change.

International Business : Prof Bharat Nadkarni Cross Border Mergers & acquisitions M & A have been a very important market entry strategy as well as expansion strategy. It may be noted that the major part of the recent FDI has been driven by cross border M&As. Between 1980 and 2000, the value of cross border M&As grew at an average annual rate of over 40%. It continues to be a powerful driver of international investment and globalisation. Several industries, such as automobiles, pharmaceuticals, banking, telecom, etc. have undergone a global restructuring as a result of cross border M&As. Advantages of M&As 1.Market entry 2.Possession of marketing infrastructure 3.Achieving economies of scale 4.Increasing the market power

International Business : Prof Bharat Nadkarni 5.Diversification 6.Acquisition of technology 7.Use of surplus funds 8.Optimum utilization of resources and facilities 9.Product mix optimisation 10.Pre-emptive strategy (to block competitor from acquisition) 11.Vertical integration 12.Tax benefits 13.Logistical factors 14.Acquisition of brands 15.Minimisation of Risk 16.Regulatory factors Ex. Asian Paints takeover of Singapore based Berger paints – entry to 11 countries incl China. Tata Steel – Corus – entry to Europe and Latin America.

International Business : Prof Bharat Nadkarni Disadvantages of M&As 1.Indiscriminate acquisitions land several companies in financial and other problems 2.When company is taken over, its problems are also often inherited 3.If adequate homework was not done and the evaluation was not right, the acquisition decision could be wrong. 4.Some of the units acquired would have problems such as old plant, obsolete technology, surplus or demoralised labour 5.The company may not have the experience and expertise to manage the unit taken over if it is in an entirely new field.

International Business : Prof Bharat Nadkarni Business Ethics & Social Responsibility 1.Committed to National interest in which it operates. 2. Global issues like Environmental discipline 3.Millennium goals as defined by UN. 4.Standardisation of Global strategies