Benefits of Cross Border Mergers and Acquisitions

Benefits of Cross Border Mergers and Acquisitions 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. Cross-border mergers and acquisitions (MA) internationally have played a key part in this issue of globalisation or global activity of growth and expansion. When firms and companies otherwise known as enterprises continually increase in size, they tend to look for more funding or capital from outside their territory (locality) or country of operation which may not be readily available in their home country of operation to further advance their growth and expansion drive. 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. According to Krekel et al.(1969) mergers usually involve businesses or corporations of same or equal size, whilst the acquiring firm in the case of acquisitions tends to be bigger or larger. According to recent trends in cross border mergers and acquisitions (MA), most of these Multinational Enterprises (MNEs) move to emerging markets in order to take charge or buy controlling interest in those markets. 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. And thus the late nineties witnessed more MA involving both local and International partners, with mega mergers between multinationals like DaimlerChrysler and Exxon-Mobil, which transformed global market competition. During this period many businesses in emerging markets were privatised thus creating growth opportunities for MNEs to gain access to previously closed markets of enormous potential. The United Nations Conference on Trade and Development (UNCTAD, 1998) unfold the driving forces behind cross border MA as per current globalisation. Practitioners of cross border MA 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) This paper will try to address the significant benefits and also some pitfalls of cross border, mergers and acquisitions as pertaining to global market growth and expansion of Multinational Enterprises (MNEs) or businesses. UNCTAD, 1999 reports that the transition host nation in a greenfield investment or mergers and acquisition stands to benefit in resources or technology. For instance the flow of foreign direct investment to a transition host nation will boost its foreign reserves (Gross domestic product). A clear example is the take over of Cadbury UK plc by Kraft Company which undervalued these shares (Cadbury) but yet invested in excess of Nineteen billion pounds (Â £19) into the UK economy in the midst of the global economic crunch. 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 stron ger market positions. Investors usually consider tax issues before deciding on where to invest or move their investments to. 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. Hitt et al (2001 a,b) described acquisition as the process by which controlling stake in a business enterprise or venture is purchased by another larger firm via an open market or on an exchange. Acquisition which is otherwise known as Takeover occurs when majority shares or stake in an organisation is purchased by another bigger firm. By this, the bigger firm take control or charge of the assets as well as the liabilities of this target business which now becomes its subsidiary. Hitt et al (2000) further saw merger as the situation where two or more smaller corporations decide to pull their resources together in order to become a giant leader in their industry or market. 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. A clear example will be the ongoing merger agreement being entered into by British Airways and Iberial Air lines which aftermath will birth a new corporate identity and image as agreed upon by the parties involved. Another example is that of GlaxoSmithKline which involved synergy between two pharmaceutical firms namely Glaxowellcome and Smithkline Becham that merged to form the second largest pharmaceutical company in Europe. It is worthy to note that synergy will provide more gain since the two companies stands to produce more when they are together through sharing of ideas and technical know how than being on their own as individual. Thus the equation of one plus one equalling three came to being (synergy theory) through merger and acquisition as beneficial to the two firms that came together as one entity or under one umbrella. Again these large companies or businesses with global repute or stature enjoy tremendous benefits in the area reduction in prices, increasing control of market and economies of scale. According to Fatemi et al (1988), even though introducing cross border MA in a near perfect market situation, the owners of the business may not enjoy dividends as per from local operation and this varied valuations for local and international mergers will seek to uncover the imperfect capital market dealings. Pringle (1991) stressed that market accessibility is the main rationale for foreign direct investment. To add to this Harris et al (1991) further elude to the fact that giant or larger companies or firms join with other firms in other nations simply to access their foreign market share. 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. HOW CROSS BORDER MERGERS AND ACQUISITIONS ARE DETERMINED Investors are always drawn to or interested in investing in high flying corporations who are consistent and increasingly growing and engaging in expansion drive of their various businesses or business units. Growth and expansion performance of businesses may be as a result of good corporate governance practices and policies adopted by or from the side of Management of that firm in line with that of the growing target market. In the words of Cheng et al (1989) and that of Moore (1996), overseas business owners or investors enjoyed high returns on their investments after being encouraged to put or invest their wealth in financial institutions (bank), outside the United States for the simple reason of their good financial health thus, favourable growth rates and high turnover in assets and expansion drive. Among other factors that positively influence cross border dealings in emerging economies like that of Africa, Eastern Europe and South America is profitability and efficiency that st ands out as the number one reason. Financiers and investors from both the United States of America and United Kingdom channel their wealth to some financial institutions (banks) and other businesses in these regions via direct investments or mergers. Hannan et al (2007), Vander (2007) and Pasiouras et al (2007) all consented that investors from the United States will shy away from investing their wealth in those financial institutions that constantly make a deficit after they (investors) have critically scrutinised and reviewed the said financial data, profitability and investor ratios before choosing the right venture to invest in, in order to maximise their wealth. 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. Hannan et al (2007) again said many of the larger financial institution (banks) and companies exploit the option of target ing emerging markets in terms of investing their resources when considering expanding their corporations. 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. Among other things, cross border mergers and acquisition can occur where there is concentration of similar businesses such as banks in a catchment area or region. 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). Another point worth considering in this determinant of cross border acquisition and merger is Taxation. 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. In the words of Scholes et al. (1990), Servaes et al. (1994) and Desai et al. (2002), investors within advanced economies or markets who pay higher taxes tend to invest overseas where they avoid tax and enjoy exemption from foreign or overseas income. For this reason several indices were created by La porta et al. (1998), useful for eper this larger created affiliation. In these indices there is also rule of law and efficient judiciary process thus ensuring that the rights of individuals are respected by all and sundry. In the same vein, Johnson et al. (2000) agreed with the above statement with emphasis on minority shareholders whilst the rights of creditors should be enforced when f irms default in their payments after notices are served. 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). LIMITATIONS It is important to note that cross-border acquisitions and mergers are not, however, without pitfalls. Irrespective of acquisition being domestic or cross-border, investors experience problem of over paying thus suffering excessive financing costs (Eiteman et al., 2004 pg. 590). 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. 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. The outcome of this is unproductiveness among employees of the target company who fear of losing their jobs or been laid off. For example the take over of Ghana Telecom by Vodafone in January 2009 saw more than thousand workers being laid off. 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). Even for some top executives, for fear losing their jobs become uncooperative when it comes to merger and takeover talks. United Kingdoms example is the aftermath of takeover of Cadbury UK by Kraft plc from United States which saw the downsizing of over four hundred of its employees after the production plant or unit in UK was relocated in Poland to reduce labour and operative costs. In the words of Hadlock et al (1999), company bosses or executives, for fear of losing their jobs after the takeover will conceal some vital information or be reluctant to provide important data that will aid the investors to properly come to a decision as to whether to invest or not in a target business. Globally, additional problems occur from the part of host countries where their government intervene in price discrimination, financing, employment guarantees, segmentation and general nationalism and favouritism which includes capital flight and corrupt practises by foreign investors with the help of personnel in state departments from target nation (see Eiteman et al., 2004 pg. 590). An example is the Quality Grain Scandal in Ghana where some ministers connived with foreign investors to cause financial loss to the state is seen as the most corrupt deal in the country (Source: newsinghana.com). 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. 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. 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. 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. Anoth er area worth considering is disclosure policy pertaining to corporate governance. Unlike the US and UK where disclosure in corporate governance is held in high esteem, that of emerging countries is very low. For instance some public companies and their private counterparts in these emerging refuse to practise international accounting standards been accepted globally and for that reason are reluctant to fully disclose information freely to prospective investors or other third parties (see UNCTAD 2000). In fact, the ability to successfully complete cross-border acquisition may itself be a test of competency of the MNE in the twenty first century (see Eiteman et al. (2004) pg. 590). SIGNIFICANT ADVANTAGES OF CROSS-BORDER MERGER AND ACQUISITION CONCLUSION Finally, managers tend to take uneconomical plans of takeovers. Sometimes, the motives for takeover decisions by managers may be attributed to availability of free cash flow or for no just cause. The number and dollar value of cross border mergers and acquisitions has grown rapidly in recent years but the growth and magnitude of activity is taking place in the developed countries, not the developing countries. As opposed to the fighting and scraping for market share and profits in traditional domestic markets, a MNE can expect greater growth potential in the global marketplace. There are a variety of paths by which the MNE can enter foreign markets, including Greenfield investment and acquisition. The drivers of MA activity are both macro (the global competitive environment) and micro in scope (the variety of industry and firm-level forces and actions driving individual firm value). 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.

Essay --

Introduction Although tempting, rapid weight loss that's not monitored by a doctor can have serious consequences. In addition to dehydration, nutritional deficiencies, heart problems, and developing gallstones and overtraining syndrome, the drastic measures required to lose weight fast are hard to maintain. MayoClinic.com states that fast weight loss is often gained back quick, and tends to be water weight and muscle tissue, not fat. They recommend losing no more than 2 pounds a week. (See References 1, 2 and 3) How Much, How Fast Fast weight loss at the expert-recommended rate of 2 pounds a week, requires that you accumulate a daily deficit of 1,000 calories. After one week, this adds up to 7,000 calories, and since there are 3,500 calories in 1 pound of fat, you will lose 2 pounds. This means that you can lose 10 to 15 pounds in about 5 to 7 weeks, give or take a few days. Gradual weight loss at a rate of 2 pounds a week gives you time to get used to the lifestyle changes you're making, which should pertain to diet and exercise. (See References 1) Effective Dietary Changes Reducing...

Deception Point Page 60

â€Å"Ms. Tench?† the transparent voice on the line said. â€Å"William Pickering, here. To what do I owe this honor?† Tench could hear the television in the background-NASA commentary. She could already sense in his tone that he was still reeling from the press conference. â€Å"Do you have a minute, director?† â€Å"I expected you'd be busy celebrating. Quite a night for you. Looks like NASA and the President are back in the fight.† Tench heard stark amazement in his voice, combined with a tinge of acrimony-the latter no doubt on account of the man's legendary distaste for hearing breaking news at the same time as the rest of the world. â€Å"I apologize,† Tench said, trying to build an immediate bridge, â€Å"that the White House and NASA were forced to keep you unapprised.† â€Å"You are aware,† Pickering said, â€Å"that the NRO detected NASA activity up there a couple weeks ago and ran an inquiry.† Tench frowned. He's pissed. â€Å"Yes, I know. And yet-â€Å" â€Å"NASA told us it was nothing. They said they were running some kind of extreme environment training exercises. Testing equipment, that sort of thing.† Pickering paused. â€Å"We bought the lie.† â€Å"Let's not call it a lie,† Tench said. â€Å"More of a necessary misdirection. Considering the magnitude of the discovery, I trust you understand NASA's need to keep this quiet.† â€Å"From the public, perhaps.† Pouting was not in the repertoire of men like William Pickering, and Tench sensed this was as close as he would get. â€Å"I only have a minute,† Tench said, working to retain her dominant position, â€Å"but I thought I should call and warn you.† â€Å"Warn me?† Pickering waxed wry momentarily. â€Å"Has Zach Herney decided to appoint a new, NASA-friendly NRO director?† â€Å"Of course not. The President understands your criticisms of NASA are simply issues of security, and he is working to plug those holes. I'm actually calling about one of your employees.† She paused. â€Å"Rachel Sexton. Have you heard from her this evening?† â€Å"No. I sent her to the White House this morning at the President's request. You've obviously kept her busy. She has yet to check in.† Tench was relieved to have gotten to Pickering first. She took a drag on her cigarette and spoke as calmly as possible. â€Å"I suspect you may be getting a call from Ms. Sexton sometime soon.† â€Å"Good. I've been expecting one. I've got to tell you, when the President's press conference began, I was concerned Zach Herney might have convinced Ms. Sexton to participate publicly. I'm pleased to see he resisted.† â€Å"Zach Herney is a decent person,† Tench said, â€Å"which is more than I can say for Rachel Sexton.† There was a long pause on the line. â€Å"I hope I misunderstood that.† Tench sighed heavily. â€Å"No, sir, I'm afraid you did not. I'd prefer not to talk specifics on the phone, but Rachel Sexton, it seems, has decided she wants to undermine the credibility of this NASA announcement. I have no idea why, but after she reviewed and endorsed NASA's data earlier this afternoon, she has suddenly pulled an about-face and is spouting some of the most improbable allegations imaginable of NASA treachery and fraud.† Pickering sounded intense now. â€Å"Excuse me?† â€Å"Troubling, yes. I hate to be the one to tell you this, but Ms. Sexton contacted me two minutes before the press conference and warned me to cancel the whole thing.† â€Å"On what grounds?† â€Å"Absurd ones, frankly. She said she'd found serious flaws in the data.† Pickering's long silence was more wary than Tench would have liked. â€Å"Flaws?† he finally said. â€Å"Ridiculous, really, after two full weeks of NASA experimentation and-â€Å" â€Å"I find it very hard to believe someone like Rachel Sexton would have told you to postpone the President's press conference unless she had a damn good reason.† Pickering sounded troubled. â€Å"Maybe you should have listened to her.† â€Å"Oh, please!† Tench blurted, coughing. â€Å"You saw the press conference. The meteorite data was confirmed and reconfirmed by countless specialists. Including civilians. Doesn't it seem suspicious to you that Rachel Sexton-the daughter of the only man whom this announcement hurts-is suddenly changing her tune?† â€Å"It seems suspicious, Ms. Tench, only because I happen to know that Ms. Sexton and her father are barely civil to one another. I cannot imagine why Rachel Sexton would, after years of service to the President, suddenly decide to switch camps and tell lies to support her father.† â€Å"Ambition, perhaps? I really don't know. Maybe the opportunity to be first daughter†¦ † Tench let it hang. Pickering's tone hardened instantly. â€Å"Thin ice, Ms. Tench. Very thin.† Tench scowled. What the hell did she expect? She was accusing a prominent member of Pickering's staff of treason against the President. The man was going to be defensive. â€Å"Put her on,† Pickering demanded. â€Å"I'd like to speak to Ms. Sexton myself.† â€Å"I'm afraid that's impossible,† Tench replied. â€Å"She's not at the White House.† â€Å"Where is she?† â€Å"The President sent her to Milne this morning to examine the data firsthand. She has yet to return.† Pickering sounded livid now. â€Å"I was never informed-â€Å" â€Å"I do not have time for hurt pride, director. I have simply called as a courtesy. I wanted to warn you that Rachel Sexton has decided to pursue her own agenda with respect to tonight's announcement. She will be looking for allies. If she contacts you, you would be wise to know that the White House is in possession of a video taken earlier today in which she endorsed this meteorite data in its entirety in front of the President, his cabinet, and his entire staff. If now, for whatever motives she might have, Rachel Sexton attempts to besmirch the good name of Zach Herney or of NASA, then I swear to you the White House will see to it she falls hard and far.† Tench waited a moment, to be sure her meaning had settled in. â€Å"I expect you to repay the courtesy of this call by informing me immediately if Rachel Sexton contacts you. She is attacking the President directly, and the White House intends to detain her for questioning before she does any serious damage. I will be w aiting for your call, director. That's all. Good night.† Marjorie Tench hung up, certain that William Pickering had never been talked to like that in his life. At least now he knew she was serious. On the top floor of the NRO, William Pickering stood at his window and stared into the Virginia night. The call from Marjorie Tench had been deeply troubling. He chewed at his lip as he tried to assemble the pieces in his mind. â€Å"Director?† his secretary said, knocking quietly. â€Å"You have another phone call.† â€Å"Not now,† Pickering said absently. â€Å"It's Rachel Sexton.† Pickering wheeled. Tench was apparently a fortune-teller. â€Å"Okay. Patch her through, right away.† â€Å"Actually, sir, it's an encrypted AV stream. Do you want to take it in the conference room?† An AV stream? â€Å"Where is she calling from?† The secretary told him. Pickering stared. Bewildered, he hurried down the hall toward the conference room. This was something he had to see. 70 The Charlotte's â€Å"dead room†-designed after a similar structure at Bell Laboratories-was what was formally known as an anechoic chamber. An acoustical clean room containing no parallel or reflective surfaces, it absorbed sound with 99.4 percent efficiency. Because of the acoustically conductive nature of metal and water, conversations onboard submarines were always vulnerable to interception by nearby eavesdroppers or parasitic suction mics attached to the outer hull. The dead room was, in effect, a tiny chamber inside the submarine from which absolutely no sound could escape. All conversations inside this insulated box were entirely secure.

Attitudes of Christianity and Islam Toward Merchants and...

From their origins to 1500, the attitudes of both Christian and Muslims toward trade shifted as conditions in the Christian and Islamic worlds changed. In the beginning, Christian attitudes were more negative, while Muslims tended to encourage and respect trade and merchants. Over time, Muslims became more like early Christians in that they were suspicious of traders whereas the Christians became more like the early Muslims, equating merchants (at least honest ones) with doing God’s work, reflecting the changed importance of trade in the high Middle Ages in Europe. At their origins, Christians and Muslims had different views about merchants and traders. This can be seen in the first two documents which are excerpts from the holy books of†¦show more content†¦Commerce is the increasing of capital by buying goods and attempting to sell them at a price higher than their cost. Waiting for a rise in the market price or by transporting the goods to another place where they are more keenly demanded. It is necessary to have enough initial capital to pay in cash the sellers from whom one buys goods, to sell for cash as honesty. Dishonesty leads on the one hand to fraud and the adulteration of goods and on the other to delays on payment which diminish profits because capital remains idle during the interval. (Document 5, fourteen century—Universal History.) Evasiveness, litigation and disputation, all of which are characteristics of the profession and qualities lead to a decrease and weakening in virtue which can mistaken as bias because some may say this persona to commerce makes one a human being. This shows a much more respectful view towards merchants and may reflect the fact that Muhammad, the founder of Islam was a merchant himself. Since this question is about attitudes about trade it would be more complete with documents portraying the views of more groups. For example, letters from Muslim merchants would allow us to examine that group’s view about trade. Documents from Orthodox Christians would give a more complete picture of the attitudes of Christianity. Collection records from Muslim mosques or Christian churches would allow us to compare how each benefited from merchants and so be able toShow MoreRelatedEssay on christianity verses islam665 Words   |  3 Pagesï » ¿DBQ Christianity VS Islam The attitudes of Christianity and Islam toward merchants and trade are similar yet different. Over time Christian and Islamic attitudes towards the merchants and trade have changed. The attitudes of Christianity and Islam toward merchants and traders are similar. 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