CROSS BORDER MERGERS AND ACQUISITIONS

The process of globalization of the economy has been strengthened at the global economy and firm’s level as the phenomenon of cross border mergers and acquisition. These affect the foreign direct investment flows, the World economy and competition.

Merger and acquisitions are a popular mode of investment for firms wishing to project, consolidate and advance their global competition position by selling off divisions that fall outside the scope of their core competence and acquiring strategic assets that enhance their competitions. For these firms, the ‘ownership’ assets acquired from another firm, such as technical competence, established brand names and existing supplier networks and distribution systems can be put to invertible use towards better serving global customers, enhancing projects, expanding market share and increasing corporate competitiveness by employing international production networks more efficiently.

For the past several years, cross border merger and acquisitions worldwide have increased significantly. The absolute value of all crosses border M & A sales and purchases amounted to $544 billion in the year 1998 representing an increase of about 60% over the year 1997. The amount was $342 billion in the year 1997. Cross-border M & A are primarily concentrated in developed countries, but there is also a trend towards an increase in such deals in some developing countries. In the year 1998, there were 89 mega cross-border M & A deals, each with more than $1 billion value. These mega deals accounted for nearly three-fifths of the total all cross-border M & A in the year 1998. Recent cross-border M & A have been concentrated in industries that are losing comparative advantages. In the year 1998, the industry that recorded the largest cross-border M &as include: oil industry, automobile industry, banking and telecommunication industry and non-petroleum mining and refining industries.