Failures of International Mergers and Acquisitions

Economies of scale: Large companies can produce products at a much lower cost than small ones because the cost per unit drops as the volume of output rises

The impact of economies and diseconomies of scale Tesco face As businesses grow and their output increases, they commonly benefit from a reduction in average costs of production. Total costs will increase with increases in output, but the cost of producing each unit falls as output increases. This reduction in average costs is what gives larger firms a competitive advantage over smaller firms. This fall in average costs as output increases is known as Economies of Scale.

Having ability to use resources across more effectively (transfer of human capital, utilising group’s plants, facilities and services) that would lead to creating various synergies and benefit from economies of scope.

Mergers and takeovers are forms of external growth within a business. External growth occurs when one firm decides to expand by joining together with another. A takeover specifically refers to the gaining control of a firm by acquiring a controlling interest in its shares (51%). Merger, on the other hand, means the joining with another firm to form a new combined enterprise, shares in each firm are exchanged for shares in the other.

In this chapter, we first provide coverage of expansion through corporate takeovers and an overview of the consolidation process. Then we present the acquisition method of accounting for business combinations followed by limited coverage of the purchase method and pooling of interests provided in a separate sections.

Becoming a larger more efficient company with a strengthening competitive position opens up the opportunity for more mergers and acquisitions of competitors, suppliers and/or customers.

Paulson E. (2001). “Inside Cisco: The real story of sustained M&A growth”, John Wiley & Sons, Inc.

Mergers and acquisitions have become a growing trend for companies to inorganically grow a business within its particular industry. There are many goals that companies may be looking to achieve by doing this, but the main reason is to guarantee long-term and profitable growth for their business. Companies have to keep up with a rapidly increasing global market and increased competition. With the struggle for competitive advantage becoming stronger and stronger, it is almost essential to achieve these mergers. Through research I will attempt to dissect the best practices for achieving merger success.

This case study examines the proposed merger of Vulcan Materials and Martin Marietta both providers of construction aggregates. A stock-for-stock merger had the potential of making the company a global leader in construction materials, but was marred by disagreements over executive succession, location of new headquarters and the stock exchange proposed by Martin Marietta. Furthermore, as negotiations deteriorated Martin Marietta attempted a hostile takeover of Vulcan and also tried to get its directors appointed to

* For the corporation that has acquired another company, merged with another company, or been acquired by another company, evaluate the strategy that led to the merger or acquisition to determine whether or not this merger or acquisition was a wise choice. Justify your opinion.

They include: creating a tax shield, generating more free cash flow for future expansions, generating more free cash flow to repurchase stock, a short run increase in EPS due to repurchase of stocks, and overall an increase to the intrinsic value of the company.

Mergers and acquisitions can be classified in terms of the direction of the growth. A horizontal merger/takeover is the combining of two firms in the same stage of production, for example Well come Pharmaceuticals merged with Glaxo Pharmaceuticals. This sort of integration takes place to combat competition from the market and secure market domination; to reduce risks and increase financial strength; and to compete in

Cross border merger and acquisition become a fundamental characteristic of the global business landscape. With the increasing significance of globalization in business sector, it is one of the quickest ways to achieve the objective. This phenomenon is not only noticeable in the developed country like American, Europe and Japan but also in the developing market like India. Since, 1991 the period of liberalization has influenced functioning of Indian corporate enterprise. This growing trend towards cross-border merger & acquisition has raised new urgency to understand and manage the tax consequences of international expansion.

Cross-border mergers and acquisitions refer to acquiring a company in another country. In the cross-border merger, companies combine their assets and liabilities into a new entity, whereas, the cross-border acquisition is a transformation process of assets and liabilities of the local company to foreign company (foreign investors). Cross-border mergers and acquisitions involve two countries; therefore, the country of the acquiring company is known as home country, whereas, countries of targeted company is known as the host country. Cross-border M&A leads to the possibility of better synergies between two companies which can provide an opportunity to expand geographically and enter a foreign market and sharing different practices to improve the business. However, conflict of management style and a turbulent integration process can be issued when merging and acquiring cross-border due to significantly different cultures.

In merger: The combining of two or more companies, generally by offering the stockholders of one company securities in the acquiring company in exchange for the surrender of their stocks. Two companies become one, decison is mutual. They are not idependent anymore