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    Basics of Cross Border M&A

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    Jitaksh G
    Cross-border mergers and acquisitions allow multinational enterprises to gain access to strategic assets in other countries, achieve synergies across operations and industries, diversify risks, and reap benefits of increased scale. There are two types: inward investments involve foreign purchases of domestic firms, while outward investments are domestic firm purchases of foreign firms. Opportunities include portfolio diversification and cost/scale efficiencies, while risks include complicated tax regulations, changing regulatory landscapes, and difficulties obtaining accurate financial information of foreign targets. Recent examples of Indian company cross-border acquisitions include Tata Steel-Corus, Hindalco-Novelis, Lupin-Gavin, and Tata Motors-Jaguar Land

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    Basics of Cross Border M&A

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    Jitaksh G
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    Cross-border mergers and acquisitions allow multinational enterprises to gain access to strategic assets in other countries, achieve synergies across operations and industries, diversify risks, and reap benefits of increased scale. There are two types: inward investments involve foreign purchases of domestic firms, while outward investments are domestic firm purchases of foreign firms. Opportunities include portfolio diversification and cost/scale efficiencies, while risks include complicated tax regulations, changing regulatory landscapes, and difficulties obtaining accurate financial information of foreign targets. Recent examples of Indian company cross-border acquisitions include Tata Steel-Corus, Hindalco-Novelis, Lupin-Gavin, and Tata Motors-Jaguar Land

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    Basic understanding of Cross Border m&A

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    Cross-border mergers and acquisitions allow multinational enterprises to gain access to strategic assets in other countries, achieve synergies across operations and industries, diversify risks, and reap benefits of increased scale. There are two types: inward investments involve foreign purchases of domestic firms, while outward investments are domestic firm purchases of foreign firms. Opportunities include portfolio diversification and cost/scale efficiencies, while risks include complicated tax regulations, changing regulatory landscapes, and difficulties obtaining accurate financial information of foreign targets. Recent examples of Indian company cross-border acquisitions include Tata Steel-Corus, Hindalco-Novelis, Lupin-Gavin, and Tata Motors-Jaguar Land

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    © All Rights Reserved
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    104 views4 pages

    Basics of Cross Border M&A

    Uploaded by

    Jitaksh G
    Cross-border mergers and acquisitions allow multinational enterprises to gain access to strategic assets in other countries, achieve synergies across operations and industries, diversify risks, and reap benefits of increased scale. There are two types: inward investments involve foreign purchases of domestic firms, while outward investments are domestic firm purchases of foreign firms. Opportunities include portfolio diversification and cost/scale efficiencies, while risks include complicated tax regulations, changing regulatory landscapes, and difficulties obtaining accurate financial information of foreign targets. Recent examples of Indian company cross-border acquisitions include Tata Steel-Corus, Hindalco-Novelis, Lupin-Gavin, and Tata Motors-Jaguar Land

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    INTERNATIONAL BUSINESS

    CROSS BORDER MERGERS & ACQUISITIONS

    SUBMITTED BY – JITAKSH GUPTA

    ROLL NO :- 18106B1054
    What is Cross Border Mergers & Acquisitions ?
    Cross-border mergers and acquisitions (M&As) is in increment trend in
    contemporary business environment. It is often specified that cross-border capital
    reallocation is partly the result of financial liberalization policies, government
    policies and regional agreements. Conventionally, developed countries, and in
    particular the developed countries of the European Union (EU15) and the United
    States, have been the major acquirer and target countries of M&As.
    Motivation for cross-border mergers and acquisitions is to build shareholder value.
    The drivers of M&A activity are both macro in scope the global competitive
    environment and micro in scope the variety of industry and firm-level forces and
    actions driving individual firm value. The main forces of change in the global
    competitive environment, technological change, regulatory change, and capital
    market change and create new business opportunities for MNEs, which they pursue
    aggressively.
    Multinational enterprises undertake cross-border mergers and acquisitions for
    various reasons. The drivers are strategic responses by Multinational enterprises
    to protect and augment their global competitiveness by

     Gaining access to strategic proprietary assets.


     Gaining market power and dominance.
     Achieving synergies in local/global operations and across industries.
     Becoming larger, and then reaping the benefits of size in competition and
    negotiation.
     Diversifying and spreading their risks wider.
     Exploiting financial opportunities they may possess and others desire.

    Cross border merger and acquisitions are of two types Inward and Outward.
    Inward cross border M&A's involve an inward capital movement due to the sale of
    a domestic firm to a foreign investor. Conversely outward cross border M&A's
    involves outward capital movement due to purchase of a foreign firm. Inward and
    outward M&A's are closely linked as on a whole M&A transactions comprise of
    both sales and purchase.
    What are the opportunities & risks of Cross Border M&As ?

    Firms consider international deals, despite the extra effort involved, due to the
    substantial benefit it can afford. Benefits come in many forms, which are listed
    below
     Portfolio diversification – Like a stock portfolio, companies should seek to
    diversify their revenue streams. This should be in the form of both product and
    geographic diversification;
     Cost synergies – reaching capacity takes time. Entering a new market
    through acquisition can aid cost efficiencies if it increases sales;
     Scale efficiencies – as with above, new customers help you scale fast;
    Some of the Risks are
     Tax – Every country has different tax laws. Although at first glance these
    may seem tedious, getting blindsided by tax regulation can be costly. Due to the
    complicated nature of international tax, we recommend using a local professional;  
     Regulatory landscape – laws, and regulations may not stay stagnant in an
    economy. Investigate the most obvious ones within the targets sectors;
     Financial information – the availability, accuracy, and reliability of the
    target’s financial information can be harder to obtain than originally thought.
    Decisions are often made without the full picture;
     
    Example of Cross Border M&As of an Indian Companies

    Domestic companies primarily engaged in the Information Technology,


    Pharmaceuticals, Automobile and Oil and Gas sector have been more active in
    achieving their international footprint gradually. Notable acquisitions by Indian
    companies in the last decade are Tata Steel - Corus, Hindalco - Novelis, Lupin –
    Gavin and Tata Motors - Jaguar Land Rover. 

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