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Mergers and Acquisitions - Essay Example

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Mergers and Acquisitions: Cross border acquisition and sources of value added in acquisitions Introduction Lakshmi Mittal’s (an Indian-born entrepreneur) €18.6 billion ($23 billion) hostile bid for Arcelor, Europe's champion steelmaker (formed, in turn, from the champions of France, Spain and Luxembourg in 2002) has became one of the hot topics in the recent past as far as cross border merger and acquisition is concerned (Cross border mergers, 2006)…
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Download file to see previous pages The barriers in establishing business units in overseas countries were diluted as a result of globalization. Moreover, it is possible for larger firms to select their own strategies or mode of entry like merger, acquisition, or joint venture to enter in to the overseas market. Competition is becoming tough in every area of business and it is difficult for even big organizations to survive in the market if they fail to implement suitable business strategies to counter the competition. It is now easy for organizations to do business in any country they want because of globalization. Outsourcing and offshoring are some of the major business strategies adopted by organizations in order to exploit the overseas market. On the other hand, some organizations use merger and acquisition (M & A) based business strategies to spread their wings in to overseas countries. Gaughan (2007) explained M & A as a process in which two corporations combined together to form a single one. Moreover, only one corporation survives after the M & A while the merged corporation goes out of existence after the merger process (Gaughan, 2007, p.12). Domestic mergers and acquisitions were popular prior to globalization; however, cross border mergers were not accepted. ...
This means cross border mergers have become a reality nowadays. The following chart provides an idea of the size of global merger deals between 2005 and 2007. (Mergers and acquisitions, 2008) “Cross border mergers and acquisitions (M&As) are a main vehicle for foreign direct Investment. Yet despite its quantitative importance, the determinants of cross-border M&As are still not well-understood” (Brakman et al, 2008, p.1). The benefits of cross border alliances or mergers are not limited to the companies alone. Cross border mergers and acquisitions may add more value to the companies and its stakeholders. This paper analyses the cross border merger and acquisition process and the sources of value added to the stakeholders as a result of this business strategy. Since the theories and principles with respect to cross border mergers are extensive, this paper will not discuss anything about negotiation, finance, alternatives etc. | Cross border merger and acquisition Leading financial consultancy Thomson Financial has said that 2006 was a mega-merger year for India: 1,164 deals valued at a total of $35.6 billion as against 1,011 deals worth $21.6 billion in 2005. After the Tata-Corus and Vodafone-Hutch mega-deals, conservative estimates by Indian analysts have pegged mergers and acquisitions (M&As), including outbound and inbound deals involving Indian firms, to reach $100 billion in 2007 (Shankar & Reddy, n. d, p.457) Companies from emerging economies like Brazil, India, Russia and China are currently engaged in acquiring some of the most prestigious companies in America, Europe and Africa (see appendix for some of the statistics of FDI inflows to the host countries as a result of cross border M& A). Recently India’s automobile manufacturer TATA acquired ...Download file to see next pagesRead More
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