Factors Affecting Pace of Cross-Border Acquisitions and Mergers

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The Global economy
By (Name)
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The City and State
The Date

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Question one
Introduction
The concept of acquisitions and mergers has evolved with quite many disciplines relevant
to management. Specifically, cross-border acquisitions and mergers is an area that is essential in
relation to international business across the world. It is also clear to note that whereas attention
will be put on the scope of the market for international acquisitions and mergers, the factors that
influence their pattern and pace will be explored. Different countries present with different
policies on acquisitions and mergers. These are the basis for the different parameters that are
based on while conducting international trade. According to Cuervo-Cazurra, Maloney, &
Manrakhan, (2007, p.755), there are quite a number of general factors that determine the pace
and pattern of acquisitions and mergers internationally, as shall be explored in the proceeding
paragraphs along with the problems encountered in data interpretations.
Internationalization is defined as a process in which different firms increase their level of
foreign market involvement over time. Moreover, it encompasses a series of aspects of the event
that come along in the course of the trade (Casillas & Acedo, 2013, p.22). There are ideal factors
that influence the patterns and pace of acquisitions and mergers. Different scholars have
examined these factors to establish that extent to which they are focal. Factors such as payment
mode, break-up fee, deal size, on-complete fee, advisors along the control exerted by the owners
have a great impact on the pace of M&As. It quite of often that most acquisitions are
characterized by cash payments as opposed to stock payment. It, therefore, takes experiences and
the number of cash flows to be effectively involved in the trade. Moreover, huge cash payment
arouses government and political influences, which over time have an impact in the entire

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process of the deals being completed. It is therefore vital to ensure that local players along with
advisors in the trade of mergers and acquisitions are involved to understand the dynamics of the
trade. Advisors play a crucial role in international mergers and acquisitions for a number of valid
reasons. It is through the advisors that knowledge on the institutional framework of the host
nation can be obtained. This enables due diligence to be conducted and ensure that all the legal
proceedings are upheld.
In addition to the above factors, there are industry and firm-specific factors that affect the
pace of cross-border acquisitions and mergers. Ryan, & Stähler, (2012, p.849) asserts that the
liquidity ratio is one of the vital factors. Firms associated with a remarkable liquidity ratio
engage more in international investment. The above is explained by their ability to own huge
asserts and financial power to effectively engage in big transactions and purchase or merge with
small firms. Moreover, firms that have high levels of productivity mostly engage in FDI as
opposed to acquisition. Financial constraints, therefore, determine a firm's ability to acquire
another firm internationally or merge. It is therefore clear to note that big firms with a big market
share and financial abilities engage most in international acquisition in order to expand their
operations. Ahammad and Glaister (2013, p.899) further assert that the target size has a very
positive impact on the performance of acquisitions. Moreover, it was also noted that acquiring
companies that employ huge resources and exerting more efforts often result in the mergers and
acquisition success in the event that the size being targeted is greater. This is as opposed to small
firms that do not have the ability to trade with huge firms because of their financial constraints
and low market share in the market.
prior-acquisition and organizational learning experience is another influential factor. In
the business context, learning and experience are some of the vital aspects that determine how

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effectively a firm engages in international trade. Organizational learning avails specific skills
that are vital in competing in international trade through mergers and acquisitions.
Internationalization strategies in most forms are based ascertained by managers of dealers that
have relevant knowledge and information (Aktas, Bodt & Roll, 2013, p.112). Therefore
experience in overseas trade has a positive impact on the firm's ability to enter an international
market. Moreover, prior experience in a similar trade, or operating in a similar host country
enables a quick and swift mode of operations. Deal negotiations are enabled by past experience
and knowledge on the business operations.
Specific factors associated with the country play a huge role in merger/acquisition trade.
An international M&A is influenced by both the characteristics of the host and home country,
political environment, economic indicators, and institutional laws. Cultural differences, political
environment, physical distance, regulatory framework, and economic performance between the
host and home countries have an effect on the acquisitions and mergers. It is clear that most
times the host governments normally restrict acquisitions that are inbound. Unfavorable
regulations and policies scare away potential investors due to over taxation (Kourdoumpalou &
Karagiorgos, 2012 p.842). More so, small economies provide limited potential for big investors
due to a limited market, raw materials, over taxation, which reduces or does not support
productivity. Conversely, cross border M&A is often hampered by political instability. In the
event that both the host nation and the home nation are not politically stable, negotiations that
result in mergers and acquisitions are never supported due to many fears of instability (Aharoni
& Brock, 2010 p.12). Moreover, certain mergers and acquisitions are never possible because of
differences in cultures. Certain cultures do not support the production of specific goods and
services, thus hindering potential mergers and acquisitions. It is therefore clear that the above