Introduction:
Cross border mergers and acquisitions involve merger or acquisition of firms in different countries. Acquisition means taking over another firm’s assets, sand operations. Merger refers to combining operations of two firms into one joint business. Cross border mergers and acquisitions are becoming increasingly popular all over the world now. The advancement of technology and globalization has now made it easier for companies in different parts of the world to come together and become one. However, companies need to consider certain factors that would ease the process of establishing their operations in other countries successfully. These factors can’t be ignored or it would become difficult to set up cross border businesses.
Factors:
Just like any other business, cross border mergers and acquisitions require proper management in order to be successful. Some critical areas in management and setting up a business are market analysis, human resource management and product development and integration. In market analysis, both the borders where the merger or acquisition is taking place have markets that need to be analyzed and similarities & differences have to be compared. Any merger or acquisition would require human resources and that obviously implies the employees needed for the firm/s. Employees have their own opinions about the direction where a firm is going and they worry about job security. These employees need to be reassured so there isn’t any drop in productivity. Lastly, product integration and development is a very vital part in establishing a successful firm. With the merger or acquisition of one business into one, integrating and developing the border across borders is a challenge and can only be achieved through proper management.
Culture integration is another significant factor that cannot be over looked. Cultures all over the world are different and when expanding a business into a different culture, the complexities of that particular culture have to be taken into account. Each culture has their own views and need so to properly integrate a business into that culture, the business will have to ensure that anything they offer to the market is inclusive. The firm will have to adapt and align its philosophy and ambitions to that of the prevailing culture.
Each country has a different set of business policies. Business involved in the merger & acquisition has its own policies. When establishing in a new country, the business would have to modify their practices according to the policies set up in that country. The business operations maybe hindered if the business takes too long to adjust to the new policies. Taxation is one of the examples of these policies. If a firm is acquiring another firm in a foreign land, it will have to pay taxes accordingly and those tax rates could be higher. The difference in tax rates of locally owned firms and foreign owned firms become a disincentive often times for the firm trying to acquire. Profitability issues arise and there’s also possibility of penalties or bans on some practices if a business fails to understand the foreign rules and regulations.
In conclusion, cross border acquisitions and mergers are difficult to venture into and business should think of all the possible ways to make this challenge easy for them.