Cross-border Mergers Research Articles

An end-to-end technology management model in cross-border M&A transactions

Subject. This article examines an adapted management model based on the use of end-to-end technologies in key business processes for finding target companies and deciding on the feasibility of implementing mergers and acquisitions. Objectives. The article aims to present an author-developed model for managing end-to-end technologies in cross-border mergers and acquisitions. Methods. For the study, we used empirical and logical constructions, analysis and synthesis, generalization, formalization, systems approach, and the graphic and tabular methods of visualization. Results. The article identifies trends in the use of artificial intelligence in the main elements of the developed management model along with traditional ways of managing mergers and acquisitions. The proposed system management integrator helps use machine learning algorithms and business process controlling to increase the accuracy and efficiency of decisions and maximize the synergy of the buyer and the target company after the implementation of mergers and acquisitions, which is verified using mathematical algorithms and developed indicators for the use of artificial intelligence and big data business process management. Conclusions. The management model of cross-border mergers and acquisitions of companies determines the use of end-to-end technologies to improve the time and quality of management decision-making.

Does corporate social responsibility affect the performance of cross-border M&A of emerging market multinationals?

How can emerging market multinationals (EMMs) overcome the outsider disadvantage and thus improve performance of cross-border Mergers and acquisitions(M&A)? This article discussed that corporate social responsibility(CSR) has influence on performance of cross-border M&A under regulation of institutional distance, to address this inquiry based on the theory of social license to operate, We empirically demonstrate that:(1) corporate social responsibility has remarkable forward correlation with completion rate of cross-border M&A, while corporate social responsibility has a strong negative influence on the length of time spent on completing cross-border M&A, indicating corporate social responsibility is beneficial to enhance the performance of cross-border M&A; (2) Large institutional distance between cross-border M&A parties can diminish the strong positive influence of corporate social responsibility on performance of cross-border M&A of EMMs.

An Analysis of the Causes and Effects of the Out-of-Control Merger and Acquisition of Subsidiaries—A Case Study of the Great Wall of Culture Company

The phenomenon of out-of-control of subsidiaries after mergers and acquisitions is becoming more and more prominent. Effective control of subsidiaries is the most important issue that needs to be paid attention to. How to reasonably and effectively control subsidiaries has become the focus of theoretical and practical research. Taking the acquisition of Jade Education by Great Wall of Culture as an example, this paper analyzes the causes of losing control after the acquisition and analyzes the impact of losing control subsidiaries on the enterprise by means of event research and financial index analysis. The study found that the main reasons for the out-of-control of subsidiaries are unreasonable performance commitment, excessive decentralization caused by cross-border mergers and acquisitions, and out-of-control caused by blind mergers and acquisitions. Moreover, the out-of-control subsidiaries are no longer included in the scope of consolidated statements, which has a significant impact on the operating conditions of enterprises. In order to prevent the subsidiaries from losing control, it is suggested to carefully select the target for merger and acquisition, conduct due diligence on the target enterprise before merger and acquisition, reasonably delegate decision-making power and enrich and improve the performance commitment agreement.

Home country adverse political shocks and cross-border mergers and acquisitions financial performance of politically connected emerging market firms

Adverse political shocks, such as removing a regime from office, are a prominent yet underexplored institutional characteristic of emerging markets. Based on protection motivation theory, we propose that adverse political shocks may decrease cross-border mergers and acquisitions (M&A) financial performance of politically connected emerging market firms (EMFs). This is because disruptive threats from political shocks are more likely to lead CEOs of acquiring firms to focus on how to employ cross-border M&As to move assets overseas for self-protective purposes, thus giving less consideration to the strategic values of deals. Therefore, M&A’s financial performance will be compromised. Such threat-led protection motivation is predicted to be stronger when the threats of adverse political shocks are appraised as being more severe and more likely to occur (i.e., when the politically connected EMFs engage in more bribery activity) and when CEOs believe they are capable of conducting protective actions to cope with threats (i.e., when CEOs have greater power). With a sample of 224 outbound cross-border M&A deals by Chinese firms two years (eight quarters) before and after the outbreak of the Bo Xilai scandal, the results support our predictions.

Risk Analysis and Preventive Measures of Enterprise Merger and Acquisition

With the rapid development of the "Internet +" economy, the retail industry began to adjust the traditional business model in line with the development of The Times, and accelerated the deep integration with the Internet through the integration of resources. In this context, the "new retail" era has officially arrived, compared with the traditional retail industry, the new retail model through the combination of online and offline services to achieve intelligence, precision, product quality, and personalized, retail growth has become a breakthrough point, because of this major retail enterprises have in the new retail format of mergers and acquisitions. Based on this background, this paper takes Suning Tesco's cross-border merger and acquisition of Carrefour as an example, and combines the historical background of new retail to study its merger motivation, merger risk and put forward relevant suggestions. By summarizing the problems existing in the process of enterprise merger and acquisition and merger experience, the study has certain objective and realistic significance.

The impact of political freedoms on cross-border M&A abandonment likelihood

This study aims to provide evidence of the impact of political factors of acquirer’s and target’s countries and their differences on cross-border merger and acquisition (M&A) abandonment likelihood, showing that political differences have a more pronounced impact on M&A abandonment likelihood compared with social or cultural differences. We analyse a large cross-border M&A data sample under a probit regression, using target’s and acquirer’s score as well as score differences computed using the sum of squared differences. The results show that while analyzed target’s political factors don’t seem to have a statistically significant impact on M&A likelihood, level of efficiency and quality of government’s core institutions as well as political culture in acquirer’s country have statistically significant impact on M&A abandonment likelihood with the first having a greater marginal effect on the M&A abandonment likelihood than the second. We also document that political culture differences between acquirer’s and target’s countries have a greater explanatory power for M&A abandonment likelihood than the difference between acquirer’s and target’s Hofstede’s cultural dimension scores. This is true both in statistical and marginal terms, with the indulgence cultural dimension being the only statistically significant variable impacting M&A abandonment likelihood. These findings represent a useful groundwork for economists, corporate finance specialists, academic scholars and practitioners, potentially allowing for a better understanding of the underlying impact of political culture and the functioning of the acquirer’s and target’s country government on M&A deal outcome.

Legislation Commentary: Amendments on the EU Harmonization of Cross-Border Mergers after the Adoption of Directive 2019/2121

Legislation Commentary: Amendments on the EU Harmonization of Cross-Border Mergers after the Adoption of Directive 2019/2121

Cross-border mergers and acquisitions by emerging country banks: What do acquisition premiums tell us?

Our knowledge of international expansion motives and strategies of emerging country banks (ECBs) is limited. Using a worldwide sample of cross-border mergers and acquisitions (CBMAs) and a mixed model, we explore firm- and country-level determinants of acquisition premiums. We show that the effects of target bank and target country characteristics on premiums are contingent on the acquirer’s home country: emerging vs. advanced. More specifically, compared to advanced country acquirers, ECBs pay lower premiums for targets that are: (i) more efficient; (ii) offering better functional diversification opportunities; and (iii) based in markets with higher growth prospects or better institutional development levels. Furthermore, state-owned ECBs pay higher premiums. Our findings suggest that CBMAs undertaken by ECBs might not be motivated by competence-enhancing strategies while being less sensitive to the target country’s institutional development.

Tariff cost and cross-border M&A affiliate sales: Evidence from China

Cross-border mergers and acquisitions (M&A) is a major form of foreign direct investment (FDI). In contrast to many developed countries, the majority of China’s cross-border M&As are vertical rather than horizontal. I study the difference in the reaction to tariff of horizontal and vertical M&A subsidiary sales. The baseline OLS regressions show that as export tariff cost increases, cross-border M&A affiliate sales relative to export rises, and the effect mainly comes from vertical affiliates, especially in downstream subsidiaries. The main results are robust to the Poisson pseudo maximum likelihood (PPML) regressions and an instrumental variable (IV) approach. A simple model is developed to reconcile the empirical findings when horizontal and vertical M&As co-exist in the same market and further tested at both the extensive and intensive margins. The results offer new insights to understanding the performance of M&As from developing economies.

Preventing Merger and Acquisition Risks: Evidence from Tianqi Lithium's Leveraged Acquisition of SQM

With the deepening of China's opening-up process and the promotion of the "Belt and Road" initiative, the wave of cross-border mergers and acquisitions by multinational corporations has officially started. Leveraged buyouts, as a special way for companies to carry out cross-border mergers and acquisitions, have also attracted the attention of enterprises and have been widely used. On this basis, this paper selects the 2018 Tianqi Lithium acquisition of SQM case, introduces the background and details of the acquisition, and analyzes the financial and non-financial risks brought by the acquisition. Furthermore, the paper investigates how the company solved the debt crisis and the impact of the acquisition on its profitability. Based on the above analysis, there are significant risks in pricing, financing, and debt repayment for the Tianqi Lithium acquisition. Recommendations for relevant enterprises on how to prevent financial risks are also provided. Overall, the analysis of the Tianqi Lithium-SQM leveraged buyout case sheds light on identifying and managing financial risks associated with cross-border leveraged buyouts, guiding further exploration of this topic.

Corruption, democracy and the location decisions of emerging multinationals: evidence from China’s cross-border mergers and acquisitions

PurposeThis study investigated the moderating role of democracy in the relationship between corruption and foreign direct investment. The purpose of this study is to understand whether corruption has different effects on the location decisions of multinational enterprises (MNEs) depending on the regime type.Design/methodology/approachThis study explored how institutional context influenced the impacts of corruption on the location decisions of MNEs, specifically using a sample of Chinese cross-border mergers and acquisitions between 2000 and 2020.FindingsThis study assessed the role of democracy in the relationship between corruption and the location decisions of Chinese MNEs. In general, this study found that Chinese MNEs were hindered by host country corruption, but that these detrimental effects were weaker in the presence of more effective democratic institutions.Originality/valueThis study contributes to the literature on institutional factors in international business through its simultaneous investigation of the effects of both democracy and corruption on the location decisions of MNEs. Moreover, there is a prevailing view that Chinese MNEs are willing to enter countries with high corruption, but the results of this study indicate that they are risk-averse in ways similar to their Western counterparts.

Interplay of cross-country distance with cross-border M&A performance: an institutional perspective

PurposeThis study aims to examine the impact of home–host country distance on the cross-border mergers and acquisitions performance.Design/methodology/approachThe results of this study are based on a final sample of 483 completed cross-border deals involving BRICS nation acquirers and targets spread across a set of 27 nations. While controlling for prior experience, among other factors, the impact of nine institutional distance dimensions on deal performance is examined. Cumulative abnormal returns calculated over the select event windows are used as a measure of deal performance.FindingsThe results of this study validate the explanatory power of cross-country distance and exhibit that financial and cultural distance exert a negative influence on deal performance, whereas political and global connectedness distance positively impacts performance. Interestingly, geographic distance is not found to be related to performance outcomes.Research limitations/implicationsThe results of this study caution against possible aggregation of the cross-country distance measure and point towards the need to acknowledge and analyse the multi-dimensional nature of distance.Practical implicationsThe results of this study are expected to aid managers in devising internationalisation strategies and target selection, maximising their performance and shareholder wealth.Originality/valueThis study contributes to the knowledge of internationalisation and cross-country distance. It presents as one of the first to investigate the impact of institutional distance on deal performance using a substantially large multi-country emerging market data set.

Cross-border mergers and acquisitions in the context of economic-behavioral phenomena

ABSTRACT. Mergers and acquisitions are a powerful way to modify a company's portfolio and generate both long-term value and resilience. The aim and the reasons behind M&A are among the aspects that contribute to their successful implementation, so ascertaining them is also important for the purposes of maximizing the positive effects of these transactions. The first partial objective of the research presented in the paper is to identify the links between the factors affecting the success of the cross-border merger and acquisition projects and the importance of the aims that the respondents want to achieve by selling the company. The second partial objective is to identify the links between the aforementioned factors and the importance of the reasons for which respondents consider cross-border M&A. The research was conducted on a sample of 244 managers of corporations based in 45 European countries that were the subject of a cross-border merger or acquisition in the 2016-2020 period with a market capitalization of more than €100 mil. using the M&APIF methodology. Several statistically significant correlations between the assessed phenomena were recorded. The research results imply that top managers should focus their attention on particular factors more and on others less to successfully implement a project of cross-border M&A. This study may, therefore, serve as a tool for them to do so.

Regional Cultural Diversity, Government Intervention and M&A Performance: Based on the Cultural Differences

Based on a sample of cross-border mergers and acquisitions (M&A) by Chinese enterprises in different target countries between 2010 and 2020, this paper explores the impact of cultural differences on M&A performance and the moderating effects of regional cultural diversity and government intervention (financial subsidies) by using event study method and regression analysis. The results indicate that cultural differences have a negative impact on M&A performance. Furthermore, regional cultural diversity and government intervention positively moderate the relationship between cultural differences and M&A performance. This research can assist Chinese companies in fully leveraging regional cultural diversity to mitigate cultural differences and enhance their corporate performance.

Genetic distance and cross-border M&A completion: Evidence from Chinese firms

Using data drawn from Chinese firms from 1996 to 2019, we explored the effect of genetic distance on the completion of cross-border merger and acquisition (M&A). We found an inverted U-shaped relationship between genetic distance and cross-border M&A completion. Further research showed that this relationship is moderated by heterogeneity at the firm-, industry-, and country-levels. In particular, when the acquirer is a foreign-listed company and the host country institution is of good quality, genetic distance has a linear positive effect on M&A completion. When the acquirer belongs to the high-tech industry and the two countries involved have not signed any bilateral investment treaties, the effect of genetic distance is not significant. Our study sheds light on the impact of genetic distance on cross-border M&A completion and enriches the related theoretical perspective. Our findings also have a certain practical value.

International music preferences as a measure of culture: evidence from cross-border mergers

This paper introduces the significance of international music preferences as a determinant of cross-border mergers. We argue that international music preferences capture the distance in culture between nations. We find that country pairs whose citizens experience relatively small distance in their music preferences (listen to each other’s music) exhibit more cross-border mergers. Overall, this study highlights that music preferences can measure international similarities in culture.

Cross Border Mergers and Competition Law in India

Cross-border mergers are becoming increasingly popular among companies looking to expand their business globally. In India, cross-border mergers are governed by the Companies Act, 2013, and the Foreign Exchange Management Act, 1999. However, competition law is also a crucial aspect to be considered while assessing cross-border mergers. The Competition Act, 2002, applies to mergers and acquisitions that result in a substantial acquisition of shares, control or assets of an enterprise, or a merger or amalgamation of enterprises. The Competition Commission of India (CCI) is responsible for reviewing and approving such mergers to ensure that they do not lead to adverse effects on competition in the relevant market. In addition, the CCI may impose conditions on the parties to the merger to ensure compliance with the competition law. It is essential for companies to ensure that their cross-border mergers are in compliance with the competition law to avoid any legal implications.

Acquirers’ carbon risk, environmental regulation, and cross-border mergers and acquisitions: evidence from China

Acquirers’ carbon risk, environmental regulation, and cross-border mergers and acquisitions: evidence from China

A practitioner's commentary on Louhiala-Salminen et al. (2005): Tackling BELF communication challenges in cross-border mergers and beyond

Based on the findings of English as a lingua franca in Nordic corporate mergers: Two case companies, speakers in international mergers who use BELF face communication challenges that result from two main sources. The first one is related to the speakers’ performance in English and includes language use and communicative practices. The second source refers to how speakers apply their sets of cultural values and beliefs in their discourse. By applying a framework of communication skills and coaching style activities the trainer can help learners develop a balanced discourse and build trust with their counterpart. These activities can further be applied in cultural transformation processes where speakers encounter similar challenges.

Institutional Differences and the Choice of Outward Foreign Direct Investment Mode under the “Belt and Road” Initiative: Experience Analysis Based on China’s Manufacturing Enterprises

Based on 1692 outward foreign direct investment (OFDI) events of 735 A-share listed companies in China’s manufacturing industry from 2010 to 2019, this paper empirically examines the effect of investment motivation and the impact of institutional differences between China and the host country on the choice of OFDI entry mode; the paper also investigates the moderating effect of the “Belt and Road” Initiative (BRI) on Chinese manufacturing enterprises (CMEs) through use of the logit model. The empirical results show that, with greater institutional differences, CMEs become more inclined to choose cross-border mergers and acquisitions (M&A). Furthermore, a positive moderating effect of resource-seeking motivation on the choice of M&A OFDI by CMEs is observed. The signing of the “Belt and Road” cooperation document positively moderates institutional differences in promoting CMEs—especially state-owned CMEs—to choose the M&A mode. The “Belt and Road” Initiative provides an efficient supply system for OFDI by CMEs. This study enriches and extends existing institutional theories and provides suggestions for the promotion of the geopolitical pattern and international cooperation regarding the “Belt and Road” Initiative.