Traversing through Cross-Border M&A

Traversing through Cross-Border M&A

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Cross-Border mergers and acquisitions are a popular way to gain access to new markets and customers. Globally cross-border Mergers & Acquisitions continue to remain as popular as it was pre-COVID-19. The COVID-19 pandemic saw companies struggling to streamline operations in Mergers & Acquisitions in the face of limited resources and social distancing measures. The reliance on technology services, which was already strong from the 2010s, hit new highs as businesses turned to fully virtual modes of operations.

Globalization has led to an exponential increase in cross-border Mergers and Acquisitions. It has been taking place along with regular trends such as corporate reorganization, increased deregulation as well as privatization. Industries such as services, pharmaceuticals, chemicals, manufacturing have been witnessing increased activity in the realm of cross-border M&A in recent years.

Cross-border M&A can lead to profitability, can even open your brand up to new markets, which in turn will lead to increased revenues. While the advantages are several we have highlighted below a few important ones:

Opportunities

Mergers and acquisitions save time and money versus starting a business from scratch. If you identify the right market overseas, consider where you might find your choice of businesses to purchase in regions where these companies already have established customer bases. This is an easy way to gain new customers and create growth.

Talent Pool

When your business acquires another business, you will be getting well-trained staff who may be working with less skilled staff. This can be a great benefit because you’re able to tap into the other team’s expertise and talent pool. It can save you time and effort when it comes to training new team members as well since the existing members of the team will have already been trained well under their previous manager(s). One less thing to worry about!

Financially Empowered

Cross-border M&A deals result in growth because it allows the two companies to generate more income by pooling their resources together. More financial power, lower competition and greater control over customers are the results of this union.­­

Technology

Cross-border mergers & acquisitions bring companies together.  This leads to technology transfer benefitting both companies as well as leading to innovations influencing the operations of the company.

Increased Productivity & Market Reach

A cross-border Merger and Integration may lead to economies of scale for the entities involved. If the companies involved in cross-border M&A are in the same industry, they can very easily increase the scale of production leading to increased productivity, further leading to economies of scale and hence leading to an increased market reach

Employment Creation

In the short term, an M&A may result in restructuring, which may then result in downscaling. The important thing to remember here is that this downscaling may be absolutely necessary at the time and may even benefit employees in the long run if the business has profitable expansion plans. In that case, it would undoubtedly generate a large number of job opportunities.

Capital Build-up

Long-term capital growth is supported by cross-border mergers and acquisitions. To expand their businesses, investment is done not only in plants, buildings, and equipment but also in intangible assets such as technical skills, rather than just capital.

To conclude, when a company from one country either buys the entire asset or a controlling portion of a company from another country, it is termed as a cross-border M&A. Cross-border mergers and acquisitions can be profitable to businesses and can have an exponential impact on the stock prices of the organization but there are certain crucial aspects which need to be taken into account to do away with any untoward surprises. It has been established without a doubt that cross-border M&A is one of the most well-known methods for organizations to access the global markets. Though little effort has been made in the study literature to investigate the influence of culture in the success of these endeavors, the poor cultural fit has frequently been highlighted as one of the reasons why M&A has failed to generate the desired results. Thorough planned preparation and investment of time and other critical resources are the most crucial aspects that distinguish successful Cross-border M&A deals from those that fail to reach the desired results.