Cross borders mergers and acquisitions in developing countries

Abstract

With increased liberalisation of policies, privatization of companies and globalization,cross border activities have increased in recent past. The concept of cross border M&Ais not new. It emerged in 1970 and had reached high deal volumes in the 1980s. Sincethe 1990s, the emerging companies had started expanding their capabilities by crossborder M&As. The firms wanted to establish foreign collaborations on the frontiers oftechnology and production. In 1980, the global outward foreign direct investments(FDIs) was nearly USD 52 billion while this figure rose to USD 2 trillion in the year 2007and expected to be around USD 2 trillion in the year 2014 (source UNCTAD). We haveseen that the contribution percentage of the emerging economies is increasinggradually. Global cross border M&A in the year 1987 account for 4% while this numberrose to 13% in 2005 and 20% in 2015. This clearly signifies the importance of theseemerging companies and their contribution to the world economy. Motive behind the M&A varies but primarily it is to gain competitive advantage. Threefactors which are considered extremely important while working on a M&A. *Ownership – leads to better technologies and managerial capabilities; access toalready established brand names which could be leveraged to betterment of theexisting firm. *Location – helps in gaining access to cheaper inputs and cost reduction in termsof better production and more market opportunities. *Internationalization – brings firm the opportunity to harness the advantage ofownership and location