Company Mergers Research Articles

Facilitating the Merger of Multinational Companies

This paper reports on case research investigating the challenges presented by a newly formed supply chain after a merger and acquisition (M&A) and the subsequent solution – the enactment of a global virtual enterprise (GVE). Adaptive Structuration Theory (AST) is used as a lens to view and understand the transformational effects that occurred after the merger and the adoption of the GVE. A case study approach was adopted with empirical data collected from corporate web sites, direct participation in the project, and in-depth interviews with the two merged multinational supply networks set in Asia (the sub-ordinates are based in China, Taiwan, Thailand, and Vietnam) and North America (sites in Canada and the U.S.). The major problems encountered in the M&A process in the supply chain included incompatible product codes, redundant business processes, no unified ERP platforms, conflict of interests of supply chain entities, etc. The findings show the GVE approach improved the efficiency and effectiveness of this global acquisition through the re-alignment of organizational structures and personnel. Implications for practice and the further application of AST to the study of global supply chains and M&A are raised.

Organizational change and human resource management interventions: An investigation of the Nigerian banking industry

The objective of this paper was to study the relationship between human resource management interventionist strategies and organizational change; and flexibility that can make employees more adaptive and receptive to changes. Out of one hundred and sixty copies of questionnaire administered, one hundred and twenty three (123) were collected and analyzed. Structural Equation Modelling (SEM), a hypothesized relationship was tested using Amos 18 that allows test of complex relationships between variables. Our model shows that relationship exists among human resource management interventionist strategies and was consistent with organizational change in the studied industry. However, the study can be extended to other industries, for example manufacturing industry as well as industry within the merger and acquisition of companies.

Focus: European Works Councils after 20 years: taking stock

European Works Councils after 20 years: taking stock the Directive’s entry into force were exempted from any statutory requirements for the lifespan of the agreement, as long as they covered the entire workforce of the group. At the end of this ‘Article 13’ period (22 September 1996), about 480 companies used the possibility to conclude ‘Article 13’ agreements. About 30 MNCs had already had a European transnational information and consultation agreement even before the adoption Directive of 22 September 1994. So many negotiations within a relatively short period between 1994 and 1996 challenged many national trade unions and demanded a huge organisational effort by the European sectoral union organisations now know as the European Trade Union Federations (‘ETUFs’). Since 22 September 1996, negotiations to establish EWCs have been governed by the procedures under Article 6 of the 1994 Directive (and now under the recast Directive 2009/38/EC), which requires the formation of a Special Negotiation Body (‘SNB’). In principle, it is still up to the undertaking’s central management and the SNB to agree on the precise form and function of their EWC. This includes, for example, the signatory parties; coverage, composition, numbers and seat allocation; the terms of office; functions and procedure ; venue, frequency and duration of meetings ; issues for information and consultation; experts; confidentiality; employee-side pre-meetings , resources and facilities for EWCs, etc. Only if management and workers fail to agree, or if they so choose, is the ‘fall back solution’ specified in the Annex to the Directive and providing statutory minimum standards triggered off. The ETUI database (www.ewcdb.eu) identifies currently 1282 EWCs (November 2013) that have ever been created of which 1048 are still active. Some EWCs disappeared due to company mergers, acquisitions and other similar reasons. New beginning for EWCs: the recast Directive of 2009 Due to lack of precedent the 94/45/EC Directive was a kind of experiment. Thus, in Article 15 it foresaw a revision procedure to take place after three years allowing for future adjustments. After many years of delay caused by lack of initiative from the European Commission, discussions between the social partners driven mainly by trade union demands, on 6 May 2009 the European Parliament and the European Council under the so called recast procedure finally adopted an amended version of the EWC Directive. This new recast Directive was a compromise solution: it addressed many, but not all demands and problematic issues identified throughout the 13 years of operation of EWCs. Many European countries have industrial relations systems where works councils play a crucial role at enterprise level INTERNATIONAL union rights Page 20 Volume 20 Issue 4 2013 I n a globalised economy managerial decisions taken at the central level consider companies as transnational organisations in which national borders are of secondary meaning. On the other hand, worker representatives have for a long time acted on a national (or local) basis. Some provisional practical solutions to this mismatch started to emerge in the 1980s in multinational companies (‘MNCs’) headquartered in France, where group works councils begun inviting foreign workers’ representatives to their meetings on an informal and even formal basis. The first pre-Directive agreements were signed in the 1980s, but this became institutionalised in 1994 with the adoption of directive 94/45/EC on ‘Establishment of a European Works Council [‘EWC’] or a procedure in Community-scale undertakings and Community-scale groups of undertakings for the purposes of informing and consulting employees’ (the EWC Directive) The goal of the Directive has been to provide employees with the right to transnational information and consultation in companies acting in the EU and the European Economic Area (EU + Liechtenstein, Norway and Iceland). At the start, the United Kingdom opted out from the Directive, but joined in 1997 (Directive 97/75/EC). As any other European directive, also the EWC legislation had to be transposed into national legal order and the Member States had two years to do so. As a result on 22 September 1996, the EWC Directive became enforceable for workers, employers and trade unions. Today, all companies (including those headquartered outside of Europe, but having Community based operations) with at least 1000 employees within the...

Comparison of Certificate Policies Formerging Public Key Infrastructuresduring Merger and Acquisition of Companies

The Public Key Infrastructure(PKI) provides facilities for data encryption, digital signature and time stamping. It is a system where different authorities verify and authenticate the validity of each participant with the use of digital certificates. A Certificate Policy (CP) is a named set of rules and it indicates the applicability of a certificate in a Public Key Infrastructure. Sometimes two companies or organizations with different PKIs merge. Therefore it would be necessary that their PKIs are also able to merge. Sometimes, the unification of different PKIs is not possible because of the different certificate policies. This paper presents a method to compare and assess certificate policies during merger and acquisition of companies.

The Spillover Effect of Chinese Reverse Merger Frauds: Chinese or Reverse Merger?

This paper examines the spillover effect of the news about fraud allegedly committed by Chinese reverse merger companies (CRMs). These CRMs recently became public through reverse mergers with U.S. shell companies rather than through traditional IPOs. A number of these CRMs had allegations brought against them for fraudulent reporting or activities. Once the regulators and the public became alarmed by the frequency of alleged-fraud revelations, the stock prices of the offending as well as other companies were hammered. In particular, other CRMs and U.S.-listed Chinese IPOs experienced strong negative spillover effects. The intensity of the effect differed according to short selling activities, suggesting that short sellers played an important role in the spillover effect. Since non-Chinese (U.S. and other foreign) RMs have escaped the wrath of investors, the stock market reaction appears to be based on the country of origin rather than the method of going public.

Auditing Issues with Chinese Reverse Merger Companies Traded in the United States

Recently there have been two issues related to Chinese companies seeking capital in the United States. The first issue is frauds that have been perpetrated by companies using reverse mergers in order to go public. The second issue is fraud in continuing audit engagements when there has been reliance by an American audit firm on a foreign accountant’s audit work. There is also conflict between the Public Company Accounting Oversight Board (PCAOB) demanding to inspect audit workpapers for companies in China and the Chinese government’s refusal to let the PCAOB see these workpapers. These issues relate to characteristics of the practice of accounting and auditing in China that threaten auditor independence and audit quality. The paper discusses: (1) issues involving reverse mergers and the response of the Securities and Exchange Commission (SEC) to these issues, (2) issues involving reliance on the work of foreign Certified Public Accountants (CPAs) and the response of the PCAOB to these issues, (3) issues involving conflicts between U.S. regulatory agencies and the Chinese government over access to audit-related documents, and (4) suggestions for future research.

Emerging Market Bidder Returns and the Choice of Payment Method in M&A: Evidence from India

Indian mergers and acquisition deals present an interesting venue to study the effects of two conflicting forces, namely, high promoter holdings and lack of debt funding, on the method of payment choice and its impact on shareholder returns. We study the short run effects on shareholders’ wealth of the acquiring companies in mergers and acquisitions in India. Analysis of abnormal returns indicates that the M&A announcements in India display positive effects on shareholder wealth, oftentimes irrespective of the method of payment. Cash deals display positive abnormal returns, and in some event windows we observe positive abnormal returns for stock deal bidders, as well. This phenomenon is contrary to the wealth effect predictions of the information asymmetry models. We offer financing constraint hypothesis and ownership hypothesis, along with an alternative hypothesis, i.e., the pseudo cash deals hypothesis to explain this anomaly. The availability of internal funds, insider ownership and size of a deal are important factors that determine the choice of payment method in Indian mergers and acquisitions.

An Empirical Critique of the Myth that Markets Value Merger Agreements

Practitioners and academics have long assumed that financial markets value the deal-specific legal terms of public company acquisition agreements, yet legal scholarship has failed to subject this premise to empirical scrutiny. The conventional wisdom is that markets must value the tremendous amount of time and money invested in negotiating and tailoring the legal provisions of acquisition agreements to address the distinctive risks facing each merger. But the empirical question remains of whether markets actually price the legal terms of acquisition agreements or whether they solely value the financial terms of mergers. To investigate this question, we designed a modified event study to test whether markets respond to the details of the legal terms of acquisition agreements. Our approach leverages the fact that merger announcements (which lay out the financial terms) are generally disclosed one to four trading days before the disclosure of acquisition agreements (which delineate the legal terms). We focused on a data set of cash-only public company mergers spanning the decade from 2002 to 2011 to ensure that the primary influence on target company stock prices is the expected value of whether a legal condition will prevent the deal from closing. Our analysis shows that there is no economically consequential market reaction to the disclosure of the details of the acquisition agreement. Markets appear to recognize that parties publicly committed to a merger have strong incentives to complete the deal regardless of what legal contingencies are triggered. We argue that the results suggest that dealmakers and lawyers focus too much on negotiating “contingent closings” that allow clients to call off a deal, rather than on “contingent consideration” that compensates clients for closing deals that are less advantageous than expected. Our analysis suggests drafting recommendations that could enable counsel to protect clients against the effects of the clients’ own managerial hubris in pursuing mergers that may (and often do) fall short of expectations.

Medium Sized High Tech International Acquisitions: A Longitudinal Perspective (1990-2011)

This article examines the various forms and strategical options that are found and employed when merging companies of any size with medium-sized technological companies, with a view to understanding what outcomes are involved. This research paper is based on a sample consisting of 5 738 mergers and acquisitions transactions in the high-tech sector, particularly those involving innovative companies with technological interests. The aim of this research is to show how these strategic manoeuvres operate, using a multi-criteria analysis chart that includes the size of the company, the level of participation, the nature of diversification, the duration of transactions and value ratios. In this way, the research will help to provide better understanding of the characteristics of these technological merger acquisition operations, creating a typology of operations and manoeuvres and correcting some of the beliefs commonly held.

Merger Dalam Undang-Undang Nomor 40 Tahun 2007 Tentang Perseroan Terbatas dan Kegiatan Yang Dilarang Menurut Undang-Undang Nomor 5 Tahun 1999 Tentang Larangan Praktek Monopoli dan Persaingan Usaha Tidak Sehat

Merger as a merger of companies regulated in Act Number 40 of 2007. The arrangement of the merger is also regulated in Act Number 5 of 1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition. Merger is closely associated with the potential for monopolistic practices and or unfair business competition, because it's basically the essence of the merger is the added value of the companies that are merging. Actions such merger should be prohibited and regulated in the law because it can cause negative effects to healthy market competition. Many people who suffer losses potentially caused by the merger, such as minority shareholders, employees, creditors, and other community stakeholders. Setting merger in the legislation is a form of prevention and mitigation activities or mergers that could reduce competition.

Comunicación interna y fusión de empresas: la necesidad de una planificación

Basándonos en el conocimiento empírico de algunas consecuencias nefastas derivadas de la revolución del 25 de Abril de 1974 en Portugal, intentamos analizar los resultados de las fusiones a nivel de comunicación interna y del conjunto del clima interno que se generó con los cambios provocados con las fusiones empresariales de 1980, muy relevantes en el ámbito de la actividad aseguradora en mi País.Recurrimos para ello a una metodologíade base cualitativa con entrevistas abiertas, semiestructuradas, y realizamos un estudio comparado entre dos grupos de empresas sometidas a dichos procesos de fusión. El factor principal que distingue a los grupos analizados se sitúa a nivel de los momentos de cambio; así, mientras que en un grupo el proceso es inmediato, instantáneo, en el otro se revela longitudinal, por fases, planeado a lo largo de tres años, lo que posibilitó lapreparación para el cambio que se avecinaba.En términos de resultados obtenidos, hemos de admitir que la confusióninicialmente percibida en los procesos de fusión, se verifica principalmente en la nueva empresa que no lleva a cabo ningún tipo de preparación en su nueva constitución, mientras que el mismo proceso resulta mucho más sencillo en la que sí tuvo la oportunidad de hacer planes durante los tres años de adaptación.

Fusions and Takeovers Corporations in the Select of Polish Commercial Law’ System

The article discusses legal conditions of company mergers. The aspect of economic relation of businesses examined herein, together with its relation to the legal reality, is approached from 161 Summaries several angles. In the article, we examine how the Polish Balance Law and the corporate code correlate as regards the two types of linkage which may exist between economic entities: (1st) per incorporationem and (2nd) per unionem. In this respect, the following aspects of legal acts have been taken into account: (1) the corporate code, (2) the Protection of Competition and Consumers Act, (3) the Accounting Act, (4) the taxes regulations, (5) the rules of record and naming taxpayers and taxpaiders NIP , (6) the corporate income tax, (7) the VAT’s taxes. Aside from legal aspects, the article also discusses accounting methods (stemming from the regulations of the balance law) which identify the absorbing entity and the absorbed entity, as well as its consequences for accounting settlement of both entities.

Corporate governance models and their impact on financial performance. Evidence from Italian utility listed companies

This paper analyses the theme of the corporate governance models of Italian utilities companies and explores how the changes of ownership structure after a merger affects financial performance. The objective of this paper is to study whether the mergers of utilities are effective for companies to be more competitive. We compare the financial performance of four Italian utility listed companies listed (A2A, IRIDE, HERA and ENIA) before and after the merger. Specifically we analyse six financial ratios (P/L for period, Profit margin, EBITDA, ROE, ROA and Gearing). Our results show that utility mergers are effective to create a more competitive firm because of the changes in the ownership of the company and consequently in the corporate governance system. Results also indicate that a listed merger company has a higher financial performance those pre-merger companies.

ZARZĄDZANIE PODATKAMI W PROCESIE INKORPORACJI TRANSGRANICZNEJ

Tax management is one of the essential aspects of mergers. Mergers of companies that are residents of different Member States are not hampered by disadvantages arising from the tax provisions; it applies to income-, capital-, as well as to value added taxation. With respect to mergers, the tax rules are neutral and allow the deferral of the taxation of the capital gains relating to the assets transferred until their actual disposal. When planning a cross-border transaction it is especially necessary to take into consideration the legal form and place of residence of the participating entities, business justification of the transaction, losses of the transferring company or the percentage of a holding in the capital of the company being taken over.

Mergers and synergy: Lessons from contemporary telecommunications history

Using contemporary historical data, the analysis reported in this article has evaluated the impact of the various mergers of the local exchange companies that took place between 1988 and 2001 on financial performance. Performance was measured using an important metric normally used to measure synergies of firms undergoing mergers. The analysis has revealed that the relative cash flow variable for firms worsened after mergers. If the synergy motive had been primary in influencing merger decisions, and also approvals, then the past mergers approved led to decreased performance levels and corresponding welfare losses for American consumers; thus, the mergers of communications common carriers were not in the interest of the public, the shareholders and customers. On the other hand, given the negative outcomes, views that the quiet life, hubris or a quest for possible market power motivated the mergers could be discarded. The lessons of such contemporary historical analysis have suggested that antitrust oppositions to contemporary telecommunications sector mergers may have basis in fact and salient evidence.

A Report of the AALL Annual meeting, Philadelphia 2011

AbstractVictoria Jannetta describes her experiences at the AALL annual meeting in Philadelphia focusing on various particular sessions given in relation to free speech, Delaware corporation law, company mergers, academic library issues and ebooks.

Deal or No Deal?

The competition policy of the European Commission has recently shifted towards including more and more consensual arrangements with business companies. While this tendency is already present for a while in merger policy where the Commission has more and more turned away from prohibiting mergers and towards consensually finding remedies in intensive negotiation rounds with the merging companies, cartel and antitrust policy only very recently has become a field for consensual arrangements in terms of the new settlement policy. This chapter describes the tendency towards more consensual arrangements and analyzes the pros and cons of such a development. In balance, the paper recommends a cautious approach because the disdvantages of such a policy evolution are likely to outweigh its benefits.

Effect of R&D and Market Concentration on Merger Outcomes – An Event Study of US Horizontal Mergers

This study examines the pattern of abnormal returns for merging companies and rivals, to determine investor expectations regarding the impact of horizontal mergers challenged by the government. Prior studies have indicated that the government may have challenged efficiency-enhancing mergers, as evidenced by the pattern of abnormal returns to rivals during merger events. This study uses a two-stage regression approach to examine those patterns, using challenged mergers from 1997 to 2007, and finds evidence of potential price effects from approved mergers. The results also show the mergers to have differential effects depending on the level of R&D, market concentration, and product sales.

Must the Losses of a Merging Company be Deductible in the State of Residence of the Receiving Company in EU?

The EU Merger Directive is silent on the question of the extent in which the state of residence of the receiving company must allow a deduction of the losses of a merging company in an intra-EU cross-border merger. The extent to which the losses are decutible depends on the domestic tax laws and the freedom of establishment principle of the Treaty on the Functioning of the European Union (TFEU). The Supreme Administrative Court of Finland considers it to be unclear whether the freedom of establishment principle of the TFEU requires Finland to allow a Finnish receiving company to deduct the losses of a Swedish merging company after a merger in which there will be no permanent establishment left in Sweden. As a consequence, the Court decided to refer a case concerning this issue to the European Court of Justice (ECJ). The Court considers that it is also unclear as to whether the deductible amount of the Swedish loss should be determined in accordance with the Swedish laws or the Finnish laws, if the ECJ considers that it has to be deductible. In this article, the author discusses the case referred to the ECJ from the perspective of the freedom of establishment principle and concludes that in the case concerned, a deduction should be allowed.

National Economy Competitiveness of Kazakhstan Republic

One of the criteria for the national economy growth of Kazakhstan Republic is its dynamic integration with national economies of the developed countries. Growth and merger of national companies at the macro and micro level is one of the priorities for the economy of each state including our country. Today in the Republic of Kazakhstan in the age of globalization, more than ever we need a system of complex measures in financial and trade sectors for its sustained development. Te article analyzes the situation of the competitiveness of the national economy of Kazakhstan. This research was aimed at studying the theoretical and methodological approaches for a development of competitive national economy in the context of globalization as well as developing practical recommendations for further economy development, which allowed to make several conclusions and recommendations arising from the aims and objectives set by the author. In the first part of this article, perspectives of national competitiveness are analyzed. In the second part of the article methodology of international competitiveness measurement is presented. In the third part of the article the analysis of Republic of Kazakhstan competitiveness is done. The results showed that there are many controversies in competitiveness definition and measurement. One of the examples is evolution of Kazakhstan’s competitiveness in 2010 due to some activities by IMF and WEF. Though the measurements include many similar factors of competitiveness, the main competitive advantage of Kazakhstan is a huge reserve of mineral resources and stable macroeconomic situation. The main weaknesses are low innovation capability and high corruption rate.