International Merger & Acquisition: Legal & Tax Implications

This assignment delves into the intricacies of international mergers and acquisitions (M&A), focusing on legal procedures, cross-cultural aspects, taxation benefits, and funding mechanisms. It examines case studies from Japan, UK, USA, and Germany, discussing hostile vs friendly takeovers, and how companies can improve performance through strategic alliances.

International Financial
Management

Table of Contents
INTRODUCTION...........................................................................................................................1
MERGER AND AQUISITION.......................................................................................................1
INTERNATIONAL HARMONISATION IN MERGERS AND ACQUISITION.........................4
ORGANIZATION STRUCTURE AND EMPLOYEE ................................................................5
TAXATION.....................................................................................................................................5
ACCOUNTING AND FUNDING..................................................................................................6
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
The concept of Merger and Acquisition has been defined as consolidation of business
organizations. The term merger stands for when two or more companies are combine together
and able to share their profit as well (Calvani and Alderman, 2010). In case of acquisition, one
financially strong company purchase financially strong company. Through which purchaser firm
hold ultimate control over another firm.
MERGER AND AQUISITION
Merger is the deal among two or more existing firms which becomes one new
company. After that it incorporate as a name of new firm. This merger can be done to
expand activities of firm in international market (Changqi and Ningling, 2010). Through this
companies are able to attain their target and maintain performance as well. There are various
types of merger mentioned rule which are as follows-
Horizontal- It is concept of merger, in which both companies are of same industry are
agree to share their profit and combined together as part of consolidation.
Market extension- In this process firm are deal in same goods and services but they
compete in several market. Companies at different location combine their business together and
open new business with new name.
Product expansion- Two companies combine together their goods as well as services and
try to attain success (5 Types of Company Mergers. 2017).
Vertical- In this type of merger two firms engaged in business of produce finished goods
together.
In case of acquisition also two companies combine together and form new business. In
this concept, one financially strong company purchase financially weak firm. After that
purchaser company hold or enjoy ultimate control over that firm. In this case target companies
ceases to exist according to legal proceedings as well as become a part of purchaser firm. In this
process target organization transfer all its assets (Cooper and Finkelstein, 2014). The term
acquisition occurs when purchasing company owned more than 50 % ownership in target firm.
Effective decision has been taken by members of acquirer regarding newly acquired assets in
order to maintain performance. It can be paid in case or in form of share or both. Higher
authority of both firms are mutually decide amount of acquisition and mode of payment as well.
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Through which no confusion has been create among them. Different types ways of payment has
been used in this process which is beneficial for them. Amount of payment has been depend on
nominal value of share. There are two types of takeover processes has been mentioned under
rules of accountancy which are as aligned below-
Friendly- This takeover has been conducted in order to attain mutual benefits. Both
companies are agree to conduct such acquisition process. Majority of shareholders are agree with
the concept of acquisition. In this process business organizations mutually take this effective
decision regarding merger and acquisition (Ferris, Jayaraman and Sabherwal, 2013). Also decide
amount and mode of payment equal to required amount mentioned under law.
Hostile- In this takeover, consent of target is not present. Majority number of
shareholders are not able to provide their consent to conduct such process (Saunders and Cornett,
2014). Purchaser company forcefully purchase another firm in order to expand its business in
across the national border. Fir this purpose they have to fulfil all their obligations which are
imposed on them according to provision of laws.
Merger and acquisition (M & A) both refers to consolidation of firms and its assets. It
include different types of transaction which has been conducted among companies. It can be
form in the interest of both firms and effective decision has been taken with the final decision of
majority number of shareholders (Gugler, Mueller and Weichselbaumer, 2012). For this purpose
the Government frame various types of rules and regulation which needs to be fulfil by
companies in order to attain their target and maintain performance as well.
Federal trade commission needs to ensures that such transactions conducted with fair
competition. They are also concerns related to anti-competitive behaviour which consists in such
transactions (Sarala and Vaara, 2010). The commission of exchange and security is play
effective role in this process. Members of such commission are must ensures that companies not
able to do illegal activities.
UK Everything Everywhere (EE) is the UK
based form which is responsible to
maintain performance of two further
firms name called orange as well as T-
mobile. In year 2016 British Telecom
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(BT) purchase EE. Such deal has been
fixed in 12.5 billion pounds. This is one
of the successful merger case in UK.
UK and USA On 31st July, 2017 there is UK based
firm name called BNP Peribas which is
real estate firm is merged with Strutt &
Parker. As such firm is founded by
London in 1885. this deal has been fixed
in interest of both companies. Strutt &
Parker having approx. 60 offices in all
over Britain. On the other hand, BNP
Peribas consists around 3500 employees
in all stores.
USA Disney and Pixar both are USA based
firms. Disney engaged in business of
released all movies of Pixar. But in year
2006 both companies combined together
and merge their business. It is biggest
example of successful merger in USA.
For this purpose members of both firms,
form legal contract to combine their
assets.
GERMANY and JAPAN There is unfriendly takeover conducted
among two companies name called
Mannesmann and Vodafone. In this case
Mannesmann is considered as acquirer
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company which purchase Vodafone. In
country of Japan, this action become the
effective reason of growth and
development. In this concept, similar
nature of organizations are combined
together in order to increase their profits
and earn large amount of profit as well.
Lots of fund required for this procedure
(Halkos and Tzeremes, 2013). After
this, the shares of target company are
transferred to purchaser company. So
that, two firms become one company
and after this they act as new firm and
maintain performance as well. This
process is considered as biggest reason
of growth and development. With the
help of concept of merger and
acquisition companies are able to
expand their business in internation al
market and earn profit as well. It is
expensive term for Japan and Germany
both.
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This above graph interprets in regard to Merger and Acquisition from United Kingdom
towards other foreign countries. In addition to this, this graph has been done for the years of
1986 to 2016.
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This graph shows that therev are various companies who have announced around 967
deals in aspect of UK, with a value of 98.6 bil.GBP. it is anotable fact that it has been seen an
increae from the past year.
INTERNATIONAL HARMONISATION IN MERGERS AND ACQUISITION.
International harmonisation is the effective process of working in setting of business
organization. In this process companies which are incorporated at international level are
try to make some plans and strategies in order to create free trade policy. It is conducted in
order to create reasonable business activities which is able to boost up level of confidence of
existence firms (Holburn and Vanden Bergh, 2014). Large number of firms found best way to
generate goodwill which is beneficial for them. Due to harmonisation process no confusion
create among companies. For this purpose members of companies needs to frame effective plans
and procedure which have to implement them according to requirement. This process conducted
at international level and able to maintain effective performance of firms. Through this smooth
functioning of entire operation is possible which is helpful for them. Members of companies
needs to use their collective efforts in order to attain target and improve work quality as well.
Procedure of merger and acquisition is done with the help of legal proceeding (Mahesh and
Prasad, 2012). Business organizations needs to comply with rules, regulation, policies and
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procedure which are imposed on them and enacted by acts of parliament. They have to comply
with laws accordingly in order to fulfil requirement of legal proceeding.
ORGANIZATION STRUCTURE AND EMPLOYEE
Cross culture- This term is also considered as potential supporter for companies which
are expand their business at international market regarding merger and acquisition situation. This
perspective has been explained in mainly three points which are as follows: household, outside
target as well as remote acquirer (Marks and Mirvis, 2011). On the other hand, European
economies are play effective role in M&A action plan. With the help of this process companies
are able to communicate with each other and try to gather important information as well.
Continuous improvement can be obtained with the help of this process. Communication
procedure can be conducted in similar as well as different ways. It is also be conducted in
different ways such as intercultural interaction. Commitment has been given by one firm to
another which needs to be fulfil by them in order to comply with laws (International
harmonization. 2017).
TAXATION
In the case of merger and acquisition companies are able to receive tax benefits which are
beneficial for them. Legal authorities receive amount of tax on production and distribution of
goods and services. So that, in merger and acquisition they receive less amount of tax. Such rate
of tax has been defined by legal authorities in favour of those organizations.
ACCOUNTING AND FUNDING
Capital- Elements macro-economic factors are considered as significant part of growth
and development of Merger and Acquisition. Amount of acquisition can be paid through two
modes of payment such as money and shares (Phillips and Zhdanov, 2013). The shares can be
paid equal to the amount of nominal value of shares. Companies are able to utilise money in
order to expand business in international market.
CONCLUSION
On the basis of above report, it has been concluded that merger and acquisition two
similar concepts in which two companies’ combined their assets and liabilities in order to attain
long term target. Through this process business organizations are able to maintain their
performance and improve work quality as well. In this report defined cases of Japan, UK, USA
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and Germany related to merger and acquisition. There are two types of acquisition process such
as hostile and friendly takeover.
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