General Analysis Of Cross-border M& As By Transnational Firms

Mergers and acquisitions (M&As) have long been a popular strategy for firms and represent an important alternative for strategic expansion. Technological development and globalization have vastly contributed to the popularity of M&As and cross-border M&As. In the decade of the 1990s (the so-called fifth merger wave), the popularity of this strategy increased tremendously. Acquisitions completed in 1997 alone were valued at more than all acquisitions during the 1980s. In 1998, worldwide M&A activity totaled more than USD 2 trillion in terms of the stock value of the transactions announced. Furthermore, the total value of deals completed between 1998 and 2000 was nearly USD 4 trillion, which is more than the total value of all deals completed during the preceding 30 years. And, while the overall M&A market follows a cyclical nature-and has cooled since the heyday of the late 1990s-the total number of worldwide M&As has been increasing recently at a rapid rate. While the majority of M&As involve two firms within the same country, over 40% of the M&As that were completed between 1999 and 2000 involved firms headquartered in two different countries. The increasing globalization of business has heightened the opportunities and pressures to engage in cross-border M&As. Cross-border M&As pose tremendous challenges, in particular, at the post-acquisition stage. Recent evidence suggests that they are not highly successful. Therefore, a better understanding of the opportunities and challenges for firms following this strategy is extremely important.Cross-border M&As is a very powerful instrument for the inter-regional or intra-regional FDI flowing with diversiform dynamics. For the economic developed countries, especially the countries of Europe Economic Community and North America, to avoid negative effect of regional integration, they would like to do the recombination of FDI, which makes M&As occur frequently. In pursuing cross-border M&As, transnational firms should consider various conditions, including country-, industry-, and firm-level factors. At the firm and industry levels, main factors are complementary resources, strategies, internal advantages, overseas experience, investment scope, diversification degree of market and products, etc.. At national level, the main factors are institutional difference, cultural difference, etc..In short term, there is difference between the effect on host country's economy by market entering modes of Greenfield Investment and M&As. But the final effect is determined by specific situation of host country. With the technological improvement by economic globalization, M&As becomes one indispensable key force in world economic and market reformation. M&As is helpful to protect and enhance the competitiveness of target firms in host country. M&As and Greenfield Investment will bring host country overflow effect and demonstration effect to a certain extent. Of course, there are potential risks of M&As, such as weaken the technological research & development capability of target firms, decrease competitiveness of host country and reduce employment opportunity, which challenge the institution set-up and market completion of the host country.Cross-border M&A by transnational firms is a dynamic learning process. There are multiple processes involved in M&As, such as due diligence, negotiation and integration. In each of them, the acquirer should improve its knowledge of how to use each of the processes to reach a successful conclusion. Cross-border M&As will have a series of effect on host country's economy. There are many overflow effects, such as to accelerate the fast economic development, to increase industry technological level, to improve industrial structure, to promote product import & export, to improve market competition situation, to increase competitiveness, to create new employment opportunity, to improve firm administration, and so on.While the exiting research on cross-border M&As has made some achievement, there are still many topics relating to cross-border M&As needs further research. We highlight five important research areas, including the theoretical base for and measurement of the determinants of cross-border M&As, unpacking due diligence and other important processes involved in cross-border M&As and clarifying the role of professional advisors, learning from successful and failed M&As, understanding the governance problems related to M&As and reframing domestic versus cross-border M&As.In. conclusion, cross-border M&As are a crucial strategic initiative involving many challengers in the global economy. Although past research has suggested important outcomes, it has not kept pace with the increasing globalization and popularity of these international strategies. There are many areas requiring more theoretical and empirical development.