...TOPIC : MERGERS AND ACQUISITIONS ARTICLE REVIEWED: Determinants of Cross-Border Merger & Acquisition Performance of Chinese Enterprises AUTHORS: Wu Changqi Professor, Peking University Xie Ningling Assistant Analyst, Sun Hung Kai Properties Ltd JOURNAL: Procedia Social and Behavioural Sciences 2 pg 6896-6905 PUBLISHED YEAR: 2010 INTRODUCTION The rapid economic growth of China since the past thirty years as enabled large numbers of Chinese enterprises to grow and gain competiveness. One of their sources of growth is through international expansion which is achieve by acquiring existing businesses abroad which is known as cross-border mergers and acquisitions (M&A). Cross –border mergers and acquisitions by Chinese firms has increased steadily up to US$ 8.139 billion between 1988 to 2003 with $216 million averagely each year, most of which occurred after 1997. Some of the Chinese enterprises that involve in cross- border M&A are Shanghai Electric Group which purchased Japanese printing machine manufacturer in 2002, TCL acquiring Schneider in Germany in 2003 and Lenovo purchased PC business of IBM in 2004. KEY WORDS Cross- border – is an activity that took place between country to country Mergers and Acquisitions (M&A) - is an aspect of corporate strategy, corporate finance and management dealing with the buying, selling, dividing...
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...World Economy FDI: The OLI Framework 1 Foreign Direct Investment: The OLI Framework The “OLI” or “eclectic” approach to the study of foreign direct investment (FDI) was developed by John Dunning. (See, for example, Dunning (1977).) It has proved an extremely fruitful way of thinking about multinational enterprises (MNEs) and has inspired a great deal of applied work in economics and international business. In itself it does not constitute a formal theory that can be confronted with data in a scientific way, but it nevertheless provides a helpful framework for categorizing much (though not all) recent analytical and empirical research on FDI. This survey first summarizes the OLI paradigm and then uses it as a lens through which to review some of the highlights of this research, while also noting some important issues that it neglects. “OLI” stands for Ownership, Location, and Internalization, three potential sources of advantage that may underlie a firm’s decision to become a multinational. Ownership advantages address the question of why some firms but not others go abroad, and suggest that a successful MNE has some firm-specific advantages which allow it to overcome the costs of operating in a foreign country. Location advantages focus on the question of where an MNE chooses to locate. Finally, internalization advantages influence how a firm chooses to operate in a foreign country, trading off the savings in transactions, holdup and monitoring costs of a...
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...Q1-1) Discuss four different methods of valuation, with a focus on their advantages and limitations. Answer: There are several methods of valuations, below are just a few: Discounted cash flow analysis (DCF) – this is considered one of the most thorough methods to value a company due to the fact that relies on free cash flows. There are two ways using the DCF method one, using the adjusted present value or the weighted average cost of capital, which shows a company how much capital is required for future income flow. Using this method gives us a more realistic thing to an intrinsic stock value, ratios may not give investors a clear value if the market is over/under valued. Some disadvantages would be that it’s based on future projections and assumptions if analysis do not have the abilities to make confident and sound future projection then this method could lead to disastrous future results. This method also viewed as a moving target and only for short term investing, requiring constant analysis and modifications. Comparable Transaction Method – this method focuses on analyzing similar transactions in the past and the market values that are similar to the company that is being purchased or looking at being purchased. Companies can look at several transactions of similar companies to help them determine a value. This value is real data and not based on future projections. Some disadvantages of this method would be the lack of financial data among private companies and past...
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...and International Mergers and Acquisitions* Jan Bena University of British Columbia† Kai Li University of British Columbia‡ First version: November, 2012 This version: December, 2012 Abstract This paper employs a novel dataset of mergers and acquisitions (M&As) for which we can observe ownership structure of a target firm including the identity of its ultimate owner if there is any, and its country of origin. As a result, we are able to improve the traditional definition of cross-border deals by taking into account the domiciles of a target firm, its ultimate owner, and the acquirer. Using dispersedlyowned target firms as the baseline, we examine whether and how different types of owners in target firms—individual(s)/family, industrial, financial, and government—as well as their domicile affect the incidence of international M&As. We find that both individual(s)/family and government target firm owners are negatively associated with the incidence of international M&As; while foreign domicile of target firm owners is positively associated with the incidence of international M&As. The interaction between the type of target firm ultimate owner and its domicile reinforces the above findings. We also examine to what extent target firm characteristics such as size and age, the recent financial crisis, and geographic, sociological, and cultural proximities impact the incidence of international M&As. We conclude that corporate ownership is an important determinant of international...
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...MANAGING CULTURAL INTEGRATION IN CROSS-BORDER MERGERS AND ACQUISITIONS Daniel R. Denison, Bryan Adkins and Ashley M. Guidroz ABSTRACT Cross-border M&A has become one of the leading approaches for firms to gain access to global markets. Yet there has been little progress in the research literature exploring the role that culture may play in the success of these ventures. Poor culture-fit has often been cited as one reason why M&A has not produced the outcomes organizations hoped for (Cartwright & Schoenberg, 2006). Cross-border M&A has the added challenges of having to deal with both national and organizational culture differences. In this chapter we review the literature on cultural integration in cross-border M&A and provide a framework designed to help manage the integration process throughout the M&A lifecycle. This framework presents culture assessment and integration as a crucial component to reducing poor culture-fit as a barrier to M&A success. Mergers and acquisitions (M&A) have become a central part of most corporate growth strategies, and an increasing portion of that M&A activity now spans national borders. Indeed, beyond a certain scale, one might say that all M&A is now cross-border M&A. For example, even a merger Advances in Global Leadership, Volume 6, 95–115 Copyright r 2011 by Emerald Group Publishing Limited All rights of reproduction in any form reserved ISSN: 1535-1203/doi:10.1108/S1535-1203(2011)0000006008 95 96 DANIEL R. DENISON ET AL. between two large...
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...MANAGING CULTURAL INTEGRATION IN CROSS-BORDER MERGERS AND ACQUISITIONS Daniel R. Denison, Bryan Adkins and Ashley M. Guidroz ABSTRACT Cross-border M&A has become one of the leading approaches for firms to gain access to global markets. Yet there has been little progress in the research literature exploring the role that culture may play in the success of these ventures. Poor culture-fit has often been cited as one reason why M&A has not produced the outcomes organizations hoped for (Cartwright & Schoenberg, 2006). Cross-border M&A has the added challenges of having to deal with both national and organizational culture differences. In this chapter we review the literature on cultural integration in cross-border M&A and provide a framework designed to help manage the integration process throughout the M&A lifecycle. This framework presents culture assessment and integration as a crucial component to reducing poor culture-fit as a barrier to M&A success. Mergers and acquisitions (M&A) have become a central part of most corporate growth strategies, and an increasing portion of that M&A activity now spans national borders. Indeed, beyond a certain scale, one might say that all M&A is now cross-border M&A. For example, even a merger Advances in Global Leadership, Volume 6, 95–115 Copyright r 2011 by Emerald Group Publishing Limited All rights of reproduction in any form reserved ISSN: 1535-1203/doi:10.1108/S1535-1203(2011)0000006008 95 96 DANIEL R. DENISON ET AL. between...
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...International Finance: A Course Overview Mihir A. Desai* Harvard University and NBER ABSTRACT This paper describes the International Finance course at Harvard Business School for instructors considering adopting the associated material. The paper begins by arguing that the forces of globalization have fundamentally changed the scope and activities of firms thereby altering the practice of finance within these firms. As a consequence of an increasing reliance on tightly-integrated foreign operations, a parallel world of finance has been opened within every multinational firm and this world has, heretofore, been overlooked. The course materials are designed to address the many aspects of financial decision making within global firms prompted by these changes that are not addressed in traditional materials. The paper provides an overview of the structure of the course and its seven modules with particular emphasis on the three modules that constitute the core of the course. The paper also describes an analytical framework that has been developed through the creation of the course materials to guide critical financial decisions on financing, investment, risk management and incentive management within a multinational firm. This framework emphasizes the need to reconcile conflicting forces in order for multinational firms to gain competitive advantage from their internal capital markets. The paper concludes with a discussion of the course's pedagogical approach and detailed descriptions...
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...Definition of Cross-border Merger and Acquisition A merger is characterized as the union of two associations into a single organization. An acquisition is the purchase of one association from another when the acquirer keeps up the control. There are local M&As and cross-border M&As. Local M&As are directed inside the same country, while cross-border M&As involve two companies from two different countries. A cross-border M&A is characterized as activity in which an enterprise from one country purchases the entire resource or controlling rate of an enterprise in another country. Mergers and acquisitions (M&As) are a basic part of the corporate rebuilding handle, and have created an unlimited scholarly writing in the course of recent decades. (Mulherin & Audra L. Boone, 2000) Cross-border mergers and acquisitions (M&As) have expanded significantly in the course of the last two decades. Given this fast increment, completely understanding the determinants and ramifications of mergers and acquisitions has been high on the plan for both strategy producers and scholastics. (Hijzen & Holger , 2006) Figure [ 1 ]: Three Stages of Cross-Border M&A The process of acquiring an enterprise has three common elements: 1. Identification and valuation of the target 2. Completion of the ownership change transaction 3. The management of post-acquisition transition The management of post-acquisition transition The merger amongst Tata...
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...course timetable. Course Subject and Goal The focus of this course is the law of mergers and acquisitions and alternatives to mergers. We will analyze how mergers and acquisitions are structured and why particular deals create value for firms. The course will examine the various techniques and deal terms that have profound effects on both parties and the outcome of the transaction. The course will include actual transactions as well as drafting exercises. We will focus on the barriers to optimal structuring and techniques for eliminating drafting problems. Emphasis will be given to understanding the legal responsibilities of the buyer and seller, as well as the financial, tax and regulatory treatment of the deal, the techniques for putting the deal together, corporate acquisition agreements and the securities and governance issues that arise in deals involving publicly listed and private companies. The course will encourage students to become familiar with the techniques used in corporate acquisitions and related transactions. Materials The readings will be posted on Blackboard. Case studies can be purchased directly from the publisher. Course Book Sherman, Andrew and Hart, Milledge A. Mergers and Acquisitions: From A to Z (Second/Third Edition) AMACOM (available in University Library and Business Law Department) Recommended Sudarsanam, Sudi, Creating Value From Mergers and Acquisitions, (Second Edition) Prentice Hall (available in University Library and...
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...Mergers and acquisitions 1 Mergers and acquisitions The phrase mergers and acquisitions (abbreviated M&A) refers to the aspect of corporate strategy, corporate finance and management dealing with the buying, selling and combining of different companies that can aid, finance, or help a growing company in a given industry grow rapidly without having to create another business entity. In the most simplest way, Merger can be defined as how a "Marriage" is whereas an Acquisition is referred to as an "Adoption" of a child Acquisition An acquisition, also known as a takeover or a buyout, is the buying of one company (the ‘target’) by another. Consolidation is when two companies combine together to form a new company altogether. An acquisition may be private or public, depending on whether the acquiree or merging company is or isn't listed in public markets. An acquisition may be friendly or hostile. Whether a purchase is perceived as a friendly or hostile depends on how it is communicated to and received by the target company's board of directors, employees and shareholders. It is quite normal though for M&A deal communications to take place in a so called 'confidentiality bubble' whereby information flows are restricted due to confidentiality agreements (Harwood, 2005). In the case of a friendly transaction, the companies cooperate in negotiations; in the case of a hostile deal, the takeover target is unwilling to be bought or the target's board has no prior knowledge of...
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...Chapter 7 Cultural Diversity in Cross-Border Alliances Susan E . Jackson Randall S . Schuler Introduction Increasingly, firms are using cross-border alliances to strengthen and maintain their position in the market place . Although often seen as a relatively fast and efficient way to expand into new markets and incorporate new technologies, the success of cross-border alliances is by no means assured . To the contrary, such alliances often fall short of their stated goals and objectives . While some failures can be explained by financial and market factors, the failure of others can be traced to neglected human resource issues and activities associated with managing the cultural diversity present in these organizations . This chapter describes the special challenges that cultural diversity creates for effectively managing human resources within cross-border alliances . Drawing upon the extensive literature regarding the management of domestic alliances and domestic diversity, we offer suggestions for how human resource management practices might be used to improve the success of cross-border alliances . Regardless of industry, it appears that it has become all but impossible in our global environment for firms to successfully compete without growing and expanding through deals that result in cross-border alliances (CBAs) (Lucenko, 2000) . In some industries, e .g., insurance, cross-border alliances provide a means for moving into new markets . In other...
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...INTRODUCTION Recently, Tesco announced that the firm was ending its US venture. Indeed, Tesco appears to be the most recent British retailer to have encountered with failure in the US. Indeed, over the past decades, several major firms such as Sainsbury’s have been compelled to review their overseas ventures (Butler, 2012). These firms have incurred significant deficits in their quest for a new market. However, there seems to be evidence that some of these companies have been able to establish themselves in some foreign markets. For example, Tesco has failed in Japan but has proved to be a success in South Korea. Over this past century, there has been an evident emergence of multinational retail corporations. The general philosophy of these companies has been economically driven, that is, to prosper in terms of sales revenue and to expand globally while acquiring maximum market shares. The most dominant firm in this aspect is U.S. based Wal-Mart that leads with sales revenue exceeding $466.1 billion in 2012, followed by French based Carrefour with income of $112.6 billion (Forbes, 2013). They are trailed by U.K based Tesco at $96.8 billion and by Germany’s Metro in fourth place with sales of $90.5 billion (Forbes, 2013). The common strategy of these stated firms has been to target their marketing efforts towards rapidly emerging countries by investing in the establishment of foreign branches. An emerging market can be defined as an economy which is in the process of a shift...
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...Available online at http://www.akpinsight.webs.com Merger and Acquisitions (M&As) in the Indian Banking Sector in Post Liberalization Regime Dept. of Commerce, AMU, Aligarh India Azeem Ahmad Khan ABSTRACT The purpose of this paper is to explore various motivations of Merger and Acquisitions in the Indian banking sector. This includes the various aspects of banking Industry’s Merger and Acquisitions. It also compares pre and post merger financial performance of merged banks with the help of financial parameters like Gross-Profit Margin, Net- Profit Margin, Operating Profit Margin, Return on Capital Employed (ROCE), Return on Equity (ROE) and Debt-Equity Ratio. Through literature review it comes to know that most of the work done high lightened the impact of Merger and Acquisitions on different aspects of the companies. The data of Merger and Acquisitions since economic liberalization are collected for a set of various financial parameters. This study also examines the changes occurring in the acquiring firms on the basis of financial ground and also the overall impact of Merger and acquisitions (M&As) on acquiring banks. The Researcher used independent t-test for testing the statistical significance and this test is applied not only for the ratio analysis but also to test the effect of Merger and Acquisitions on the performance of banks. This performance is being tested on the basis of two grounds i.e. Pre merger and Post merger. The result of the study indicates that the banks...
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...CHAPTER 1 INTRODUCTION INTRODUCTION Money lending in one form or the other has evolved along with the history of the mankind. Even in the ancient times there are references to the moneylenders. Shakespeare also referred to ‘Shylocks’ who made unreasonable demands in case the loans were not repaid in time along with interest. Indian history is also replete with the instances referring to indigenous money lenders, Sahukars and Zamindars involved in the business of money lending by mortgaging the landed property of the borrowers. Towards the beginning of the twentieth century, with the onset of modern industry in the country, the need for government regulated banking system was felt. The British government began to pay attention towards the need for an organised banking sector in the country and Reserve Bank of India was set up to regulate the formal banking sector in the country. But the growth of modern banking remained slow mainly due to lack of surplus capital in the Indian economic system at that point of time. Modern banking institutions came up only in big cities and industrial centres. The rural areas, representing vast majority of Indian society, remained dependent on the indigenous money lenders for their credit needs. Independence of the country heralded a new era in the growth of modern banking. Many new commercial banks came up in various parts of the country. As the modern banking network grew, the government began to realise that the banking sector was...
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...Int. J. of the Economics of Business, Vol. 8, No. 2, 2001, pp. 173 ± 190 The Eclectic (OLI) Paradigm of International Production: Past, Present and Future JOHN H. DUNNING ABSTRACT This article describes the origins, and traces the subsequent evolution of the eclectic paradigm from the mid-1950s to the present day. It does so in the light of the changing characteristics of MNE activity and of the global economic scenario. The article concludes by asserting that the eclectic paradigm still remains a powerful and robust framework for examining contextual specific theories of foreign direct investment and international production. Key words: Eclectic paradigm; FDI; MNEs; Strategy; International production; Alliances. JEL classifications: F21, F23, M21. 1. Its Origins Although the eclectic paradigm (or the eclectic theory as it was initially called) of international production was first put forward by the present author at a Nobel Symposium in Stockholm in 1976, its origins can be traced back to the mid-1950s. At that time, I was writing my PhD thesis, later to be published as a book (Dunning, 1958), on US direct investment in British manufacturing industry. Earlier research by Rostas (1948), Frankel (1955) and some Anglo ± American study teams1 had shown that the labour productivity in US manufacturing industry was, on average, 2 to 5 times higher than that in UK industry. The question this fact posed in my mind was: was this difference in productivity a reflection of the...
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