Exploring Cross-Border Mergers: Trends and Insights

The provided content comprises academic articles and online sources that examine cross-border mergers and acquisitions. The articles investigate various factors that influence the success of such transactions, including cultural differences, macroeconomic trends, and emotions. The sources also explore the determinants of merger premia and the role of narrative construction in multinational corporations. Additionally, there is an online source that provides reasons why Google bought YouTube.

International
Management
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TABLE OF CONTENTS
Introduction......................................................................................................................................3
Main body........................................................................................................................................3
The concept of cross border mergers ..........................................................................................3
Circumstances in which MNE's internationalize using cross border merger .............................4
One successful and one unsuccessful cross border merger.........................................................5
The reason why one succeeded and other one failed ..................................................................6
Recommendation ........................................................................................................................8
Conclusion ......................................................................................................................................9
References .....................................................................................................................................10
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INTRODUCTION
Nowadays, effective management of international business has become very essential for
growth and success of global brands. Further, effective management is not an easy task as
businesses are required to deal with lots of issues and challenges1. Companies also need to
develop effective strategies in order to overcome all major issues faced by them. The present
research report explores the concept of cross border merger along with the key situations in
which organizations opts for such kind of strategy. A research regrading one successful and one
unsuccessful cross border merger is also mentioned in the present study.
MAIN BODY
The concept of cross border mergers
In last few years, the concept of cross border merger among businesses has grown with a
very good pace. It can be stated that the concept is not only providing benefits to companies but
it has also started to play very important role in shaping back the entire structure of industry at
international level. Cross border mergers became more popular in the year 1990's where foreign
investments started laid more emphasis on cross borders mergers and acquisitions instead of
focusing upon concepts such as greenfield investments. Today, cross border merger has become
a common phenomenon and are carrying out in almost every industry 2. The main reason why
such kind of strategies or concept has become so popular is that they not only aid to existing
sales, profits of a business enterprise but also offers several kinds of benefits to the host countries
where merger has taken place. It supports nations in boosting up their overall economic growth
by encouraging more foreign investments. In simpler term cross border merger can be defined as
the situations in which two businesses operating in different nations integrate with each other in
order to achieve some common goals and objectives. Usually these are the business deals which
is carried out between international company and domestic company in the specific or targeted
country. Cross border merger has helped entire economy of the world in getting accelerated and
perform more effectively. There are two different types of cross border mergers which are
1 Vaara, Eero, and Janne Tienari. "On the narrative construction of multinational
corporations: An antenarrative analysis of legitimation and resistance in a cross-border
merger." Organization Science. 22, no. 2 (2011): 370-390.
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carried out by organizations and they are vertical and horizontal mergers. In context of a business
enterprise, cross border mergers can provide several kinds of benefits. One of the major and most
important among all is related to increasing of sales and profitability. In the present scenario, the
competition among businesses in almost every industry has become so intense that it is not easy
for companies to attract new customers and retain their old ones.
Further, operating only in domestic market also restricts profits of organizations due to
limited number of customers. Therefore, cross border merger helps firms to move towards other
countries and find new customers base which can results in increasing sales and profits. Apart
from this, cross border mergers also supports in lowering down the cost associated with carrying
out business in international market 3. Integrating resources and management practises with other
firms directly results in dividing the entire risk associated with carrying out operations in the
international marketplace. The concept of cross border merger can be inward or outward and it
entirely depends on objectives of a firm that what kind of merger they should carry out. It can be
stated that inwards mergers results in movement of funds or capital within a nation. For example
a foreign investor has merged with domestic firm. On the other side of this, outward merger
results in outflow of the money as domestic company mergers with other foreign businesses.
Circumstances in which MNE's internationalize using cross border merger
Cross border mergers are not always beneficial and there are certain situations or
circumstances in which multinational enterprise (MNE) can make use of such mergers for
internationalization. In situations where existing competition level is very high, businesses can
adopt this strategy. High degree of competition creates several kinds of obstacles in long term
growth and success of any organization. In addition to this, it also results in creating difficulties
for companies to increase their sales, profits, market share and existing customer base. Thus, in
such kind of situations, firms can adopt the strategy of internationalization with an objective to
acquire new customers and maintain their market share. Other than this, cross border mergers
can be used in circumstances where internationalization seems to be a risky move. For many
3 Brakman, Steven, Harry Garretsen, Charles Van Marrewijk, and Arjen Van
Witteloostuijn. "Cross‐Border Merger & Acquisition Activity and Revealed Comparative
Advantage in Manufacturing Industries." Journal of Economics & Management Strategy 22, no.
1 (2013): 28-57.
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business enterprise, expansion of operations in other international market is not an easy task and
companies are required to deal with various factors. Different types of international markets has
different type of customer taste and demand which needs to be taken care of. This means that it
is not necessary that a product is successful in one market will attain the same kind of success in
other international market . Therefore, businesses can make use of cross border mergers in order
to lower down the risk associated with failure. By integrating business operations with other
foreign company, a business enterprise has an option to lower down risk associated. Some other
circumstances in which cross border mergers can be used by multinational enterprise for
internationalization includes business strategy which focus on internatio4nal operation and
reducing the cost of operations.
Sometimes, organizations adopts the strategy of cross border merger with an objective to
low down their cost of operations. It can be stated that moving in other countries help firms in
acquiring raw material and labour at cheaper cost 5. Minimizing cost of regulatory compliance
can be other circumstance in which business can opt for the strategy of cross border merger in
order to carry out internationalization. Further, before planning to operate in any new nation, it is
required by companies to identify business environment, customer trends and level of
competition prevailing in the market place. This will result in development of more effective
strategies for carrying out smooth flow of operations and business activities in the international
market. Apart from this, it will be also required by firms to become aware about and follow all
rules, legislations and laws which guides business practise in other international country.
One successful and one unsuccessful cross border merger
In context of successful mergers it can be stated that the merger of YouTube and Google.
Further the deal was completed for £880m paid by Google to YouTube and it can be stated that
there are several kinds of reason associated behind the same. One of the key reason which forced
4 Sinkovics, Rudolf R., Stefan Zagelmeyer, and Verena Kusstatscher. "Between merger
and syndrome: The intermediary role of emotions in four cross-border M&As." International
Business Review 20, no. 1 (2011): 27-47.
5 Uddin, Moshfique, and Agyenim Boateng. "Explaining the trends in the UK cross-border
mergers & acquisitions: An analysis of macro-economic factors." International Business
Review 20, no. 5 (2011): 547-556.
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Google to merger its operations with YouTube can be considered as its popularity. YouTube is
considered as one of the most successful and popular video streaming site all across the world.
On the other side of this, Google video do not have any kind of existence even in the top ten
video playing sites in the world. Apart from this, Google has also made a big mistake by not
acquiring MySpace in situations where it was having chance to acquire the same. This means the
organizations was no more interested in repeating the same mistake again and thus it merged
with YouTube in order to enhance its existing sales, profits and popularity. The merger also
resulted in enhancing the overall search quality of Google's products and services.
Other than this, in terms of unsuccessful mergers, it can be stated that the merger of
Chrysler and Daimler can be considered as one of the most unsuccessful merger in the history of
world. It was in the year 1998 the two companies Chrysler and Daimler agreed to merge their
operations and share resources with each other in order to attain some common goals and
objectives. The main objective behind carried out this merger was to take advantage of
globalization and ensure long term competitiveness in the marketplace. After the merger took
place there were main products and services which were launched by the above stated two
companies. The entire merger took place in the year 1998 and costed a sum of around $38
Billion. However, it can be argued that due to some reasons the merged completely failed and
provided several kinds of losses to both the business enterprise 6. Thus, it can be expressed that it
is not necessary that mergers and acquisitions always succeed and if things are not managed
properly huge losses needs to beard by a company. At the time of making such kinds of
decisions, there are various things or factors which needs to be taken into considered.
The reason why one succeeded and other one failed
Effective market research and popularity of YouTube and Google can be termed as the
key reason why the merger between above mentioned two companies became so successful.
Google also identified different key reason regrading why merger with YouTube will be
beneficial for the brand. It can be said that Google videos were not so popular among people in
the market whereas video of YouTube are very famous all across the world 7. Apart from this,
YouTube also has a very loyal, active and enthusiastic followers which has ultimately benefited
6 Sonenshine, Ralph, and Kara Reynolds. "Determinants of cross-border merger
premia." Review of world economics 150, no. 1 (2014): 173-189.
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Google after carrying out the merger. In terms of sharing and uploading also the followers of
YouTube are very active as compared to any other online video steaming site. Google on the
other hand is considered as one of the most successful and popular search engine 8. The strategic
decision of merger has helped Google to acquire a community which is highly active in terms of
sharing videos and information. Another key reason why YouTube merger with Google can be
termed as successful is of stickiness and usability. The main difference between YouTube videos
and Google videos was that people love to watch different types of videos on YouTube for long
time when which was not the same in case of Google. This market gap was identified by Google
and by working upon the same, it decided to merge with YouTube. The merger became very
successful and helped both these brands to carry out smooth flow of operations and activities in
long run.
On the other side of this, culture can be termed as the main or key reason which has
resulted in failure of the merger carried out between Chrysler and Daimler. In terms of culture, it
can be stated that both the organizations completely failed to integrate their respective cultures
with each other and this ultimately resulted in providing huge losses to both the business
enterprises 9. Chrysler was a company whose culture laid emphasis on daring creativity and
diversification. This means it was very aggressive in terms of making bold moves and strategic
decisions. On the other side of this, Daimler is a German based organization which is
conservative and safe in nature 10. This means that the culture which has been implemented by
both the above mentioned organizations completely different from each other. Apart from this,
the level of hierarchy which has been adopted by Chrysler and Daimler was also different.
Chrysler was carrying out its operations with a more team oriented approach in which all team
members were encouraged to take part in the decision making process and strategy formulation.
7 Qiu, Larry D., and Shengzu Wang. "FDI Policy, Greenfield Investment and Cross‐border
Mergers." Review of International Economics 19, no. 5 (2011): 836-851.
8 5 reasons why Google buy YouTube. 2015. [Online]. Available
through:<https://www.searchenginejournal.com/5-reasons-why-google-will-buy-
youtube/3876/>. [Accessed on 16th September 2016].
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10 Cultural differences in integration. 2016. [Online]. Available
through:<http://www.commisceo-global.com/blog/cultural-differences-in-international-
merger-and-acquisitions>. [Accessed on 16th September 2016].
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Daimler on the other hand has adopted for a structure which depicts a strong chain of command
which needs to be followed by each and every employee working in the organization. Another
key difference between Chrysler and Daimler was related to how these brands treated their
respective clients. Chrysler was more focused towards attaining success through understanding
customer need, demand and then developing products on the basis of the same to gain customer
satisfaction. However, it can be argued that Daimler looked forward to attaining success by
focusing on design of their cars and offering the same at prices which were very competitive.
Thus, differences in corporate cultures and values can be termed as one of the main and most
important reason which resulted in failure of merger between Chrysler and Daimler. Other
reasons includes lack of communication, effective coordination and trust among employees of
both the organization after the merger took place.
Recommendation
It can be stated that cross border merger is not an easy task and therefore companies are
required to take care of several things in order to make those mergers successful. Some
recommendations for carrying out successful cross border mergers are mentioned below as:
 It can be recommended that before adapting the strategy of merger, businesses should
carry out effective market research related to organization and country. The market
research may include identification of elements such as market trends, customer
demands, level of competition and overall business environment. On the basis of
information collected more successful strategy related to cross border merger can be
developed by organization.
 It can be also recommended that integration of corporate culture and values is one of the
most important thing which needs to be taken care of at the time of choosing strategy of
merger across border. The chances of failure increase in situations where two companies
or organization has different type of values and culture which guides their operations and
activities. Therefore, it is suggested that at the time of carrying out such kind of merger, it
is required by companies to lay emphasis on integrating their respective cultures.
 It is also recommended that in order to attain successful cross border mergers, companies
should focus on development of effective plans and executing the same. Planning
supports companies to identify what kind of resources and people are required to carry
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out smooth flow of operations and activities. Further, it is suggested that a democratic
leadership style is more effective and suitable during the initial stage of merger.
Organizations needs to develop new goals, objectives and needs to communicate the
same to all the employees working in the organization. By making use of democratic
leadership style, businesses can create satisfaction among workers by encouraging their
view regarding how merger can be carried out successfully.
 It is also recommended that effective communication and coordination needs to be
developed by businesses in order to make cross border mergers more successful and
attain the best possible outcome. It can be stated that such kind of mergers usually
involves two different employees working together and they belong to different cultural
background. Therefore, if communication and coordination among workers in not
effective, mergers will result in complete failure.
CONCLUSION
From the above carried out report, it can be concluded that internationalization has
become very important for higher growth and success of a business operating at domestic level.
Further, the strategy of cross border mergers is more suitable and effective for
internationalization as it results in lowering down the risk associated with carrying out operations
in other country. It can be inferred that the integration of business culture and values is the key
reason which has resulted in making merger of Google and YouTube successful and the merger
of Chrysler and Daimler a complete failure. It can be also concluded that there are several things
which needs to be taken care of by a business enterprise before adapting for the strategy of cross
border merger.
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REFERENCES
Beladi, Hamid, Avik Chakrabarti, and Sugata Marjit. "Cross-border merger, vertical structure,
and spatial competition." Economics Letters 109, no. 2 (2010): 112-114.
Brakman, Steven, Harry Garretsen, Charles Van Marrewijk, and Arjen Van Witteloostuijn.
"Cross‐Border Merger & Acquisition Activity and Revealed Comparative Advantage in
Manufacturing Industries." Journal of Economics & Management Strategy 22, no. 1
(2013): 28-57.
Erel, Isil, Rose C. Liao, and Michael S. Weisbach. "Determinants of cross‐border mergers and
acquisitions." The Journal of Finance 67, no. 3 (2012): 1045-1082.
Qiu, L.D., 2010. Cross-border mergers and strategic alliances. European Economic
Review, 54(6), pp.818-831.
Qiu, Larry D., and Shengzu Wang. "FDI Policy, Greenfield Investment and Cross‐border
Mergers." Review of International Economics 19, no. 5 (2011): 836-851.
Sinkovics, Rudolf R., Stefan Zagelmeyer, and Verena Kusstatscher. "Between merger and
syndrome: The intermediary role of emotions in four cross-border
M&As." International Business Review 20, no. 1 (2011): 27-47.
Sonenshine, Ralph, and Kara Reynolds. "Determinants of cross-border merger premia." Review
of world economics 150, no. 1 (2014): 173-189.
Uddin, Moshfique, and Agyenim Boateng. "Explaining the trends in the UK cross-border
mergers & acquisitions: An analysis of macro-economic factors." International Business
Review 20, no. 5 (2011): 547-556.
Vaara, Eero, and Janne Tienari. "On the narrative construction of multinational corporations: An
antenarrative analysis of legitimation and resistance in a cross-border
merger." Organization Science. 22, no. 2 (2011): 370-390.
Online
5 reasons why Google buy YouTube. 2015. [Online]. Available
through:<https://www.searchenginejournal.com/5-reasons-why-google-will-buy-
youtube/3876/>. [Accessed on 16th September 2016].
Cultural differences in integration. 2016. [Online]. Available through:<http://www.commisceo-
global.com/blog/cultural-differences-in-international-merger-and-acquisitions>.
[Accessed on 16th September 2016].
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