The Impact of Cross Border Mergers between the Other Countries and the UK - Dissertation Example

For instance, when the Daimler-Benz and Chrysler merged, both the companies stopped to exist and in their place DaimlerChrysler was formed. Cross border mergers are those mergers where the involved companies are set up in different countries. They comprise of a growing percentage of all the mergers. The cross border mergers are of two kinds, viz., the inward cross border mergers and the outward cross border mergers. In the inward cross border merger, the entire or parts of domestic companies are put up for sale to overseas investors, which result in inward movement of capital.

In the case of an outward cross border merger, the domestic companies purchase the entire or segments of foreign companies resulting in outward flow of capital (Organisation for Economic Co-operation and Development. Economic Analysis and Statistics Division, 2003). Cross-border mergers are a very significant occurrence in the global economy. They encompass greater than 50% of all the foreign direct investment taking place in the world (Gugler & Et. Al., 2003). Companies engage in cross border merger activities for various motives, such as intensification of their market position, growing their business, getting hold of the other company’s complementary resources, and to improve their efficiency by global business reorganization among others.

During the period from 1995-2001, the United Kingdom was the second target nation after the United States for cross border inward mergers. During the same period, the United Kingdom was leading acquiring country, with most number of outward overseas mergers (Organisation for Economic Co-operation and Development. Economic Analysis and Statistics Division, 2003). Cross Border Mergers continued to contribute for a major percentage of annual global foreign direct investment flows till 2007. The overseas mergers were the chief mode of foreign direct investment entry to other countries, and consequently the primary reason for the boom in the global foreign direct investment market during the phase from 2003 to 2007.

However, during 2008, due to the impact of the global financial crisis, the number of cross border mergers as well as acquisitions plunged. The decline in the overall cross border mergers has had a considerable effect on the Foreign Direct Investment flows. This was because, the flow of Foreign Direct Investment are strongly interrelated with the worth of the overall overseas merger transactions. There was a major reduction in the cross border merger activities in both the manufacturing as well as the services sector from 2008 to 2009.

There was also an apparent relative swing towards the non-financial services, such as the food, beverages sector, during the same period. An impressive rise in the investments in agriculture and other associated activities through cross border mergers was recorded during 2007-2008 (Burksaitiene, 2010). The research objective of this study is to analyze the impacts of the 2008 financial crisis that led to a global economic depression on the field of cross border mergers as an important investment method in the United Kingdom.

The study also explores the major expansion opportunities and also the difficulties relating to the cross border mergers in the United Kingdom. The study also discusses the cross border mergers in details, including the advantages of investing through