International Financial Management : Assignment

INTERNATIONAL
FINANCIAL MANAGEMENT

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
QUESTION A..................................................................................................................................1
Critically appraising success of merger and acquisitions in UK, USA, Germany and Japan
countries.................................................................................................................................1
QUESTION B..................................................................................................................................4
Analysing possibilities of international harmonisation which occur in M&A field..............4
CONCLUSION................................................................................................................................4
REFERENCES................................................................................................................................6

INTRODUCTION
Merger and acquisition (M&A) is a term of corporate finance in which two companies
join for further business. In the M&A generally two joined firms come up in the market with new
name. The present project refers to the success of different merger and acquisitions which was
occurred in generally four countries. Various countries of which M&A success is critically
appraised in the present study includes UK, USA, Germany and Japan. Apart from this,
possibilities due to which international harmonisation occurred in the merger and acquisition are
described in the study.
QUESTION A
Critically appraising success of merger and acquisitions in UK, USA, Germany and Japan
countries
Merger and acquisition is the procedure in which two companies join together for a
specific purpose. When two businesses combined then usually come with other new name in the
market. Apart from this, a condition in which targeted company is acquired forcefully by
resulting firm, known as hostile takeover. There are basically four kinds of M&A which includes
horizontal, vertical, concentric and conglomerate mergers (5 Types of Company Mergers, 2017).
In different countries this kind of situations often occur and success of them explained with
reference to four countries below:
UK merger and acquisition
According to Greve and Zhang (2017) in the country UK, proportion of merger and
acquisition is high in comparison to other countries. Most of the businesses for combined uses
the M&A technique and try to avoid hostile takeovers because of having negative impact on
capital structure. The time when mergers come into existence in UK then beneficial for the
economy and merged firm. In the UK country, from January 2012 to June 2016 success of the
merger and acquisition are of the upward trend consistently. The reason is that, mostly Chinese
companies included in M&A process through which UK gains high advantages. When
considering to the present M&A conditions of UK then businesses of China are the most active.
Through continuous merger economy of UK also become beneficial and able to grow in the
world. Some major examples of M&A are such as follows:
1

 Carphone Warehouse and Dixon, these two entities are agreed for merging in UK
economy and deal closed with worth of 3.8 billion GBP in May 2014. New name of
business replaced is Dixon Carphone. After completion of 3 years of merger, the firm
able to make 80 million GBP annual savings which is highly succeeded (Jones, 2014).
 Another successful merger in UK was in 2010 where Thomas Cook and Co-Operative
group combined. New name was Co-Operative travel group where £6 million post
merger profit is earned at the end of FY 2013.
USA merger and acquisition
When talking about the M&A of USA country then proportions are lower than UK. In
context to this, Hsu, Wright and Zhu (2017) described that, mergers in the United States are
become succeeded up to the certain level. In the cited country when two entities merged then try
to create own benefit by which whole economy able to grow. It is one of the developed economy
in the world and behind this M&A also had some contribution. The P&G firm purchased Gillette
for growing and innovation intention. Within sometimes, wide range of problems and issues
incurred or faced like disruptions, legal laws, government inquiries etc. In this condition, P&G
used various strategies to combat such issues and boost up synergy gains. After using some
techniques and strategies P&G merger become successful in USA.
As per the opinion of Shen (2016) another highly successful merger was occurred in
Biotech industry of USA in year 2016. In this IMS Health Holding as well as Quintiles
Transnational Holdings firms merged and addressed with new name i.e. “Life-science
companies”. The deal was signed in $12.8 billion with intention of innovative medicines and
demonstrate them in the real biotech world.
Germany merger and acquisition
As per the views of Kraus (2017) Germany country is well developed economy in terms
of manufacturing sector. Under this research and development segment grow rapidly in the world
due to which mergers incurred with few number. Instead of merging with the businesses of
Germany, companies prefer investing in the manufacturing firm of Germany. Along with this,
major number of investments made in the Germany are from the Chinese because China country
also deals with the manufacturing. Highly significant as well as the largest deal which made in
2

Germany is one kind of takeover. In this, German participation was takeover by the company
Bayer AG to Mansanto. This was the Hostile takeover in which targeted firm was German
participation and second one was resulting. Along with the largest investment by foreign i.e.
China it was one of the biggest cash buyouts. Moreover, deal of this buyouts beat among other
two firms like Anheuser-Busch as well as InBev with worth of US$60 billion.
Barney and Turk (2016) explained that, another deal which was successfully incorporated
in the Germany i.e. between Praxair Inc. and Linde AG. Intention behind making deal with this
targeted company is create to itself the largest company of world in gas industry. Value on which
this particular deal closed in the year 2016 is US$43 billion. Further, it is one of the highly
valuable deal or merger of the Germany. Hence, it can be said that, M&A in the respective
country become successful.
Japan merger and acquisition
According to Schneider, Kulms and Roehder (2017) M&A in Japan country are different
from the above mentioned countries. The reason is that, in Japan it is mandatory for acquirer
firms to consider leadership, cultural and strategic concepts of it. Due to this particular causes,
situation of merger and acquisition in Japan occurs in rare case. When several rules and legal
laws required to adopt after merging then create issues for both the targeted and resulting firms.
Along with this, reputation of Japan considered bad in terms of investors which is also reason of
declining M&A. After making investment in Japanese firms by cross border or in border entities
then cannot generate positive or beneficial return. Majority of the acquisition occurred in Japan
country are from the cross border as compared to the domestic.
Ma, Geng and Chu, (2016) ascertained that one of the major acquisition occurred recently
in Japan country. Canon is highly reputed company across the world in Electronics industry,
acquired Toshiba Medical System Corporation (TMSC) which operates in Medical Electronics
on march 2016. When deal completed between these both the entities then TMSC become
subsidiary of the Canon Inc. Further, TMSC valued at the time of acquiring by Canon was worth
of JPY 666.5 billion. It is a successful merger done in Electronics industry within Japan.
After considering critical analysis of all the countries' merger and acquisition it can be
said that, UK country has major number of successful mergers than other countries. Apart from
3

this, very few mergers in different form happened within Japan. Moreover, in USA also
successful mergers happened which lead to supportive for developing economy.
QUESTION B
Analysing possibilities of international harmonisation which occur in M&A field
Harmonisation is a concept which considered in merger and acquisition for using same
accounting standards and financial treatments by the companies. When this term used by
proposed firms who are going to merge or combine with another then mandatory to follow
international accounting harmonisation. Through this, M&A will be done in proper direction
along with at the fair value. Possibilities or reasons of this term in M&A are mentioned below:
 At the time of acquiring a company by particular business then determine proper
valuation is one of the significant. Behind this, international accounting harmonisation
has a key role because it is supportive in order to follow specific standards and theories
(Anthony, 2017). When targeted and resulting both entities use this term then able to
make effective business valuation.
 Possibilities after using this term is that, businesses of either domestic or cross border can
compare with another company which is going to acquire or merge with it. Further, able
to make comparison in terms of financial health also in the international market;.
 In addition to this, until and unless fair value is not derived of a targeted company then
resulting firm unable to take decision of merger. When entities consider harmonisation
then make proper valuation which lead to support for determining fair value in the
industry (Liang and et.al., 2016). Moreover, problem incurred at the time of merger and
acquisition in terms of financials will be resolved up to the higher extent.
CONCLUSION
It can be ascertained from the present report that, merger and acquisition is significant
part of the country where two businesses combined behind achieving specific purpose. In UK
country M&A occurs most of the times with higher number in comparison to other stated
countries. Further, major successful mergers in different forms are from UK and USA country
compared to Germany as well as Japan. Further, in Japan mergers come into existence in rare or
4

few time. Beside this, it can be concluded that, international harmonisation plays significant role
in M&A for doing appropriate business valuation as well as derive fair value.
5

REFERENCES
Books and Journals
Anthony, M. U .G. O., 2017. EFFECTS OF MERGER AND ACQUISITION ON FINANCIAL
PERFORMANCE: CASE STUDY OF COMMERCIAL BANKS. International Journal of
Economics and Finance. 1(6). pp.93-105.
Barney, J. B. and Turk, T. A., 2016. 5 Superior Performance from Implementing Merger and
Acquisition Strategies: A Resource-Based. The Management of Corporate Acquisitions:
International Perspectives. pp.105.
Greve, H. R. and Zhang, C. M., 2017. Institutional logics and power sources: Merger and
acquisition decisions. Academy of Management Journal. 60(2). pp.671-694.
Hsu, K. C., Wright, M. and Zhu, Z., 2017. What motivates merger and acquisition activities in
the upstream oil & gas sectors in the US?. Energy Economics.65. pp.240-250.
Liang, Z. and et.al., 2016. Determinants of Inter Country Investments Through Merger and
Acquisition in Emerging Asian Markets. Pakistan Journal of Social Sciences. 36(2).
Ma, J., Geng, M. and Chu, Y., 2016. Model selection for merger and acquisition analysis in
Asian emerging markets. International Journal of Revenue Management. 9(1). pp.40-56.
Schneider, J., Kulms, T. and Roehder, A., 2017. Merger & Acquisition. In Kompendium der
Unternehmensführung. Springer Berlin Heidelberg.
Online
5 Types of Company Mergers, 2017. [Online]. Available through:
<https://www.mbda.gov/news/blog/2012/04/5-types-company-mergers> [Accessed on 22nd
August 2017].
Jones, R., 2014. 5 successful examples of high-street brand mergers in the UK. [Online].
Available through: <http://blog.katapult.co.uk/5-successful-examples-of-high-street-brand-
mergers-in-the-uk> [Accessed on 22nd August 2017].
Kraus, W., 2017. Mergers & Acquisitions in Germany. [Online]. Available through:
<http://www.roedl.com/services/success_in_germany/mergers_acquisitions_in_germany.ht
m> [Accessed on 22nd August 2017].
6

Shen, L., 2016. 12 Biggest Mergers and Acquisition of 2016. [Online]. Available through:
<http://fortune.com/2016/06/13/12-biggest-mergers-and-acquisitions-of-2016/> [Accessed
on 22nd August 2017].
7