Strategic Motives for Cross-Border Mergers and Acquisitions in the Digital Era

This paper aims to explore the strategic motives for CM&As in the digital era, as well as the consequences and challenges of these investments. The research questions include: What are the strategic motives for CM&As in the digital era? What are the consequences and challenges of investments in CM&As?

1. ABSTRACT
2. INTRODUCTION
2.1. Rationale and significance of the research
This paper will analyse the strategic motives of companies for cross-border mergers and
acquisitions in the digital era. Uddin, Moshfique, and Boateng (2014) claims, that cross-
border mergers and acquistions occur when foreign and domestic companies that are separate,
come together in a target country in which only one company ceases to exist. Over the past
deacades, globalisation has impacted people and communities worldwide and has
significantly influenced sustainable development. Moreover, in the digital era, fast-paced
changes occur in technology, the mobility of goods, services, capital, labour, and capital
increased, our economies, societies and the natural environment has changed and made our
world connected more than ever before (Brocke and Sinnl 2011). Consequently, companies
are becoming more competitive as boundaries are getting less rigid and therfore they are
willing to develop globally. Cross-border mergers and acquisitions (CM&As) happen to be
one of the ways for achieving their targeteds as they are among the most important
phenomena of modern economies (Kwoka, 2002). Barkman (2008) claims that cross-border
mergers and acquisitions in terms of economic importance, it is a positive global effect. The
study indicated that mergers and acquisitions are a global phenomenon economically wide.
One of the reason is because, it gives the chance to enterprises to directly access resources,
technologies, achievements of a target company, knowledge in order to strengthen and build

core competencies, as well as gaining competitive advantage(Anand and Khanna 2000, Helfat
and Peteraf 2003). Thus, it enables expansion of the firms business, technological scopes, to
overcome rigid core crisis, and it is the best way to create capabilities for a company
(Eisenhardt and Martin 2000). CM&As can be a tool for increasing market share, diversifying
products and services, gaining new skills, operational flexibility, improving learning,
innovation, sharing risk and more (Buckley, Clegg and Wang 2002, Benito 2005, Wei and Liu
2006).One of the top priorities for most companies is profit growth and to achieve that,
companies are willing to take significant measures like CM&As.
Moreoover, one of the most popular motive behind many CM&As is to increase the efficiency
in production in the business. To increase the scale of production companies in the same
indsutry are merging. Additionally, CM&As also expand market reach. Increasing the scale of
services in more countries also benefits businesses by attracting diverse professionals that can
bring new ideas and help the firm to achieve its targeteds.
Even if CM&As could increase a firms share prices greatly, some obstacles can also occur. A
great majority of businesses believe that CM&As are complicated and contains many risks
and challanges that can lead the firms to failures. Different countries have different business
regulations, and consequently, labour and tax issues can arise when merging companies
accross borders. Karim and Mitchell (2000) claims that it presents multiple challenges and
obstacles as well, such as, the difficulty of evaluating target firms, cultural and institutional
differences, and the liabilities of foreignness among others. In addtiion, emerging markets
usually do not have refined their business market structure such as developed countries have,
and therfore, imposes a requirement of deep knowledge of the host country's implicit rules
and behaviour. From the other side, the rigorous regulation of developed countries, such as
the labour norms, requires a foreign firm to possess an advanced knowledge of these rules to

successfully manage an acquired firm (Carbonara and Caiazza, 2008a, b). This result with
several complex variables to CM&As deals and complicates the business merging process.
Understanding the strategic motives for CM&As of both countries involved in and learning
from similar cases are imperative.
2.2. Research questions
This paper will raise several research questions, in order to fill the defined research gap:
RQ1: What are the strategic motives for CM&As in the digital era?
RQ2: What are the consequences and challanges of investments in CM&As?
2.3. Research aim and objectives
The first research objective is to overview the cross border mergers and acquisitions by
explaining definitions and types of cross-border mergers and acquisitions with appropriate
literature. Secondly, to explore strategic motives for cross border mergers and acquisitions
and recent trends and patterns. Thirdly, to critically evaluate the main challenges that
businesses faces. Furthermore, one of the objectives is to analyse the cross border factors that
influences the decisions for cross-border mergers and acquisitions. In addition, another
research objective is to explore the consequences of today’s huge investments in cross border
mergers and acquisitions activities.
The aim of the research is to provide new insights into cross border mergers and acquisitions,
based on received wisdom from existing literature, to examine the challenges, issues that
company faces, and to recommend proper solutions for them. Moreover, to highlight the
strategic motives of businesses and what are the consequences of investments in cross-border
mergers and acquisitions.

2.4. Structure of the dissertation
3. LITERATURE REVIEW
This chapter will critically discuss and provide a summary of the research aim and objectives,
including core knowledge and theories to the particular topic and area of research in order to
show the relevance and originality of the research problem.
Over the past decades, the trend of globalisation is rising and as it grows worldwide, many
businesses are inclined to develop globally. Many companies seek for increased opportunities
and cheaper alternatives to build companies internally through cross-border mergers and
acquisitions (CM&As). On the other hand, a great majority believe that CM&As are very
complicated and contains variables that can lead a business to failures. To build a better
understanding, it is important to know why and how IT companies merge with or decide to
acquire other company in this digital era.
3.1. Conceptualisation of cross-border mergers and acquisitions
3.1.1. Evoulution
According to Whitaker (2016:3-5) mergers and acquisitions (M&A) are historically a recent
phenomenon linked to a certain form of economic developmnet. The evolution of M&A
market shows a globalisation of this tool as a leading business transformation mechanism.
However, Gregoriou and Renneboog (2007) argued that because of the rapid development in
global economy, mergers began to take place intensively during 1980’s and started to shape a
new “behavior” in an excessively competitive economical environment.

DePamphilis (2009), Gaughan, P. A. (2010), Sherman, A. J. (2010) in their research claimed
that for more than a cenutry the M&A market has been expanding globally to new territories
and new sectors. That resulted with an increased awarness of such transactions and with the
number of sector concerned by cross-border deals in countries over the world. Institue of
Mergers, Acquisitions and Alliances (IMAA) as an academic institution has conducted a
research which covers the years between 1985 and 2015 in which shows how M&A's have
intensified over the years worldwide.
In addition, Whitaker (2016: 5) claims that this mechanism of ownership change and also
corporate value transformation has ups and downs. Moreover, the way how cross-border
M&As are accepted and used still differentiate between countries.
Over the past three decades most of the world FDI has been carried out via CBM&A
(UNCTAD, 2000, 2012). Chen and Findlay (2003) reported that CBM&A became an
important entry mode of FDI by multinational corporations.
According to many authors, merger and acquisitions have evolved in five waves (Sudarsanam
2003, Stigler 1950, Chandler 1991). Furthermore, as seen from past experience M&A are
triggered by economic factors (Sudarsanam 2003). The key role in designing the process of
M&A between companies or organisations plays the macroeconomic environment, which
includes monetary policies, the growth in GDP and interest rates (Martynova and Renneboog
2008).
3.1.2. Definitions
Merger and acquisitions happens when two legal entities‘ assets and liabilities are combined
to become one legal entity (Frantlikh 2003). If we are to define merger and acquisition
separately, according to Scott (2013), mergers are a combination of two or more companies in
which the assets and liabilities of the selling fimrs are absorbed by the buying firm.

Although, the buying firm may be a considerably different organisation after the merger, it
retain its original identity. Whilst, acquisiton is the purchase of an asset such as a plant, a
divison, or even an entire company.
Other author clamis that merger is the combination of two or more companies in creation of a
new entity or formation of a holding company (European Central Bank, 2000, Gaughan, 2002,
Jagersma, 2005, Awasi Mohamad and Vijay Baskar, 2009). In addtion, acquisition is the
purchase of shares or assets on another company to achieve a managerial influence (European
Central Bank, 2000, Chunlai Chen and Findlay, 2003, Awasi Mohamad and Vijay Baskar,
2009), not necessary by mutual agreement (Jagersma, 2005, Awasi Mohamad and Vijay
Baskar, 2009)
The purcahse of the trade name and assets of an aquiree by an acquirer headquartered outside
the country where the acquired company
CBM&A is defined as the purchase of the trade name and assets of one company (an
acquiree) by another company (an acquirer), headquartered outside the country where the
acquired company is located as the combination of two companies of diff erent nationalities.
In a cross-border acquisition, the control of assets and operations are transferred from a local
to a foreign company, with the former becoming an affi liate of the later (UNCTAD, 2000).
Kotter and Schlesinger (2005) described that mergers and acquisitions occur when two
separate firms come together in which only one company ceases to exist. Following the
merger and acquisition, the acquired company is subject to managerial, economic and legal
control of the acquiring company. In a takeover or an acquisition, one company takes over the
control of assets and liabilities of another company. Acquisitions may range from partial to
complete acquisitions. With complete acquisition (100% control), the acquired fi rm ceases to

exist. In terms of merger, two companies combine, but few companies really merged.
UNCTAD (2000) suggests that mergers and acquisitions basically mean acquisitions.
Therefore, despite all kinds of theories and definition to differentiate merger from acquisition,
the acquirer companies usually prefers to call it M&A, that leads to the word merger and
acquisition being used interchangeably today. Unless the deal is being generally recognised as
a hostile takeover by the acquirer, where then it would be seen as a pure acquisition, in any
other cases, M&A will be generally recognised as the same.
3.1.3. Types of CM&As
Mergers and acquisitions can be generally classified to congeneric M&A and
conglomerate M&A. Congeneric M&A can be further breakdown to horizontal M&A and
vertical M&A.
• Horizontal M&A occurs when two companies in the same industry come together to
combine, and most probably are competitors (Chunlai Chen and Findlay, 2003). The
motives behind a horizontal M&A are mainly to tap into new market segment, to
achieve cost saving, and increase market.
• Vertical M&A occurs between two companies in different stages of production; for
example manufacturing and marketing combine (Chunlai Chen and Findlay, 2003).
The motives that is driving vertical M&A is the intention to reduce dependencies and
to reduce overhead cost and to gain the scale of economies.
• Conglomerate M& A involves two unrelated businesses, with the purpose to
diversify capital investment and also to achieve scale of economies. (Gaughan, 2002).
3.2. The importance of strategic motives for CM&As in the digital era

In the Digital Revolution, started during the 1980s and is ongoing, technology advanced and
developed from analog, electronic and mechanical devices to the digital technology which is
available today. It all started with one fundamental idea: Internet (Ries 2011).
The time when change with an exact beginning and an end has passed. Digital transformation
has become global. It can be seen through technology, business, and leadership. It affects
every one in all aspects, and yet it remains partially unexplored (Ries 2011). Disruptions rate
are accelerating and have become continuous. The digital transformation has windened the
gap between change and a business ability to adapt. It revolutionized the ways we
communicate, spend our time, work, and consume.
The digital era compels companies to react or else. To succeed in this era, leaders must grasp
these changes. The Digital Revolution is sometimes also called the Third Industrial
Revolution. According to many authors, multinational companies outperform other
enterprises and that they are responsible for much of the world's innovations, expenditures,
and research and development (Criscuolo et al. 2010, Criscuolo and Martin 2009, Greenaway
and Kneller 2007, Helpman et al. 2004).
Moreover, a wide part of the foreign direct investment (FDI) of multinational companies takes
the form of cross-border mergers and acquisitions, especially among developed countries and
in industries with a high R&D intensity UNCTAD (2005, 2007).
As can be seen in a research of Harvard Business Review (2018), M&A activity did not
disappoint in 2017 and 2018. Every once in a while it is possible to see a new mega merger or
purchase not only from some of the biggest IT vendors and service provider giants, but also
solution providers and IT distributors.
Some of the biggest technology cross-border acquisitions and mergers that happened in 2017
are:

1. CenturyLink as a telecom provider combines with level 3 Communications with a
price of $34 billion. The new company, combined, serves global enterprise customers
and forms the second largest domestic communications provider.
2. Intel bought Israel-based automotive chip maker MobilEye company for $15.3 billion.
In that way, Intel is combining its Automated Driving Group operations with
Mobileye, and created a way to deliver cloud-to-car solutions for the automotive
market segment.
3. Verzion's acquisition of Yahoo. This shows another sign how large companies look to
build out stronger advertising businesses in competition with companies such as
Google and Facebook by bringing together multiple audiences for economies of scale.
3.3. Theoretical strategic motives for cross-border mergers and acquisitions
One of the most common questions in the minds of researchers is why companies pursue
cross-border mergers and acquisitions. According to Erel (2012), companies acquire with the
motive of enhancing market power, seeking growth, and gaining efficiency.
Most of the prior literature describes CM&As as a way for achieving additional market share
or synergies (Walter and Barney 1990, Schmitz and Sliwka 2001). On the other side, Hitt
et al. (2001), Calipha et al. (2010) and Gomes et al. (2011) suggest the existance of more than
one motive for CM&As. Some of the same motives are identified by various authors, while
some of them overlap.
The main motives discussed in the literature include the following.
A) FACILITATE FASTER ENTRY INTO A FOREIGN MARKET

According to Mohammad et al. (2016), acquisitions allow the enterprise a faster entry into a
new market. To build up a global organisation and to gain a competitve presence can be really
expensive, difficult and time-consuming as there can appear many issues such as different
business practices, differences in culture, liability of foreigness, and etc. Mohammad claims
that CM&As offer significant time saving in this respect. For instance, CM&As allow an
instant access to local network of suppliers, clients, marketing channels, and other skills.
Martin et al. (1998) and Datta and Puia (1995) in their work have suggested that CM&As can
be used to not only access new markets but also to expand the market for a business's current
goods. It provides the opportunity for an immediate access to a market with established sales
volume. Compared to greenfield investment or joint ventures, CM&As provides also the
fastest means for international expansion (UNCTAD 2000). Shimizu et al. (2004) claims in
research on entry mode choice also claimed that acquisitions is more convinient for a faster
entry into a new market than greenfield investment.
When an investor has lack of time to enter into the foreign market, the only available choice
will be to acquire an existing company as greenfield entries require a much slower and more
moderate approach. The mode of the entry choice influences the timing of the investment
(Hennart and Park 1993). More precisely, the choice of an acquisition allows the investor to
enter into the foreign market more quickly, if the target market has a high growth rate.
Moreover, in a research of the growth of CM&As over recent years is highlited that in the
prior studies CM&As activities as an entry mode of FDI have focused on industry and firm
level-related factors (Uddin and Boateng 2011).
B) INCREASE MARKET POWER
When the enterprise have the ability to sell its products above the existing competitive market
prices or when its distribution, service costs or manufacturing costs are lower than those of

competitors, than the market power exists (Mohammad et. Al 2016). Hitt et al. (2001) states
that the market power is a product of the business's size, its ability to make decisions today
that will lead to new competitive advantages tomorrow, and its degree od sustainability of its
current competitive advantage.
When the firm acquires a company competing in the same industry and often in the same
segments of the primary industry, a supplier or distributor, or a business in a highly related
industry, cross-border acquisitions are used to increase market power (Hitt et al., 2001).
When an enterprise operates within a concentrated market where there are fewer competitors,
merging thorough horizontal integration could provide the company more market power. As a
company has more market power, the ability to impact and/or control prices is also growing
(Mohammed et. Al 2016).
Companies seek to control additional parts of the value-added chain and one way of doing it
is through vertical acquisitions. The additional market power is gained when a firm acquire
either a supplier or a distributor or an organisation that already controls more parts of the
value chain. In addition, it can also be gained when the enterprise acquires a firm competing
in an industry that is highly related.
In a sample of 154 Chinese companies, company's strategic assets seeking managerial intent
to catch up with world-leading economies by acquiring strategic assets abroad has been
influenced by their exposure to foreign competition, their finanacial, managerial capabilities
and their governance structure (Cui et al. 2014).
In a research of Nicholson and Salaber (2013), was explored the value creation of CM&As in
emerging markets and its impact on shareholder wealth creation. The research showed that
Chinese investors gain from cross-border expansion of manufacturing firms, and that the

performance of cross-border acquisitions can be also affected by the location, with
acqusisitons into developed countries generating higher returns for shareholders.
C) ACCESS TO AND ACQUISITON OF NEW RESOURCES AND TECHNOLOGY
A number of studies suggest that cross-border M&As are motivated by an opportunity to
acquire new capabilities and learn new knowledge (Barkema and Vermeulen 1998,
Madhok 1997,Vermeulen and Barkema 2001).
In this digital era, products rely on so many different critical technologies that most
enterprises can no longer maintain cutting-edge sophistication in all of them (Ohmae 1989).
Likewise, Shimzu et al. (2004) suggested that companies may engage in CM&As to exploit
intangible assets Correspondingly to Caves (1990) who agrues that acquisition of a foreign
competitor enables the acquirer to get more opportunities by bringing under its control a more
diverse stock of specific assets.
However, Buckley et al. (2014) indicated that while some types of resources and investment
experience might be beneficial, some other types of experience may have a damaging impact
on the performance of the incumbent target companies due to facilitating resource
redeployment and the exploitation of complementarities.
Additionally, cross-border acquisitions involving both an acquiring company and a target
company in the technology intensive sector provide opportunities for the acquiring company
to combine and judiciously utilise intangible resources of both companies on a broader scale
across new geographies and as a result create superior wealth gains (Kohli and Mann).
In an empirical study of companies between 2000 and 2009, Almor et al. (2014) found out
that bornglobal technology-based companies can increase their chances of survival by
acquiring other firms. However, Mohammad et. Al () claims that such acquisitions do not

increase profits, they allow born-global firms to continue increasing their sales and to expand
and upgrade their product lines, which in turn increases their chances of remaining
independent. Therefore, Almor et al. (2014) recommend that maturing, technology-based,
born-global companies should be more aggressive in pursuing their M&A strategies if they
wish to be successful.
D) DIVERSIFICATION
According to many authors, one of the dominant motive for CM&As has been suggested
diversification as a well-documented strategy for firm expansion. Sudarsanam (1995) states
that diversification is generally defined as enabling the company to sell new products in new
markets.
International acquisitions provide access not only to important resources but also allow
companies a chance to reduce the costs and risks of entering into new foreign markets
(Mohammad et. Al 2016). Furthermore, Seth (1990) argued that geographical market
diversification is a source of value in CM&As. The market power conferred by international
scope and ability to arbitrage tax regimes are unique to international mergers. However, as
economic activities in different countries are less than perfectly correlated, portfolio
diversification across boundaries should reduce earnings volatility and improve investors’
risk–return opportunities Buckley et al. (2014).
E) IMPROVED MANAGEMENT
Sirower (1997) concludes that managers try to maximise shareholder value in two ways. One
way is by replacing inefficient management in the target firm and the second is by seeking
synergies through the combination of the two firms.

Gaughan (1991) states that some M&As are motivated by a belief that the acquiring
company’s management can better manage the target’s resources. The acquirer may feel that
its management skills are such that the value of the target would rise under its control. The
improved management argument may have particular validity in the case of large companies
making offers for smaller companies. The smaller companies, often led by entrepreneurs, may
offer a unique product or service that has sold well and facilitated the rapid growth of the
target. As the target grows, however, it requires a very different set of management skills
than were necessary when it was a smaller business.
Gaughan (1991) said that the lack of managerial expertise may be a stumbling block in the
growing company and may limit its ability to compete in the broader market place.
Furthermore, these managerial resources are an asset which the larger firm can offer the
target.
F) SYNERGY
According to Bradley et al. (1988) and Trautwein (1990), enterprises engage in M&As in
order to achieve synergies. Synergies are combined operations and activities such as research
and development, procurment, marketing, and other cost components, which were performed
by the separate firms. By combining it, CM&As can increase the capacity and opportunity to
reduce costs through economies od large-scale production, pooling resources to produce a
superior product and generate long-run profitability in an enterprise.
Same as many other authors, Porter (1987) claims that foreign investment describes various
means by which CM&As may create value. One source of operating synergy comes from the
potential to transfer valuable intangible assets, such as skills, between the combining
companies.

Although, various authors (e.g. Williamson 1975, Rugman, 1982), assume that transacting in
the international market entails substantial costs which will reduce the value od proprietary
information. Because of this cost, a firm will be likely to internalise the transaction and use
the proprietary information within its expanded organisation. The motive is to acquire skills
and resources from CM&As that are expected to be valuable in their home markets.
A related source of synergistic gains in cross-border acquisitions focuses on market
development opportunities. In order to utilise their “excess” resources for long-run
profitability efficiently, firms will invest abroad when growth at home is limited or restricted
and in the presence of trade barriers which restrict exports. (Almor et al. 2009, Weber and
Tarba 2011, Weber, Tarba and Reichel 2009, 2011, Weber, Tarba and Rozen Bachar
2011, 2012).
G) MANAGERIAL MOTIVE
In order to maximise the utility of the enterprise, managerialism hypothesis suggests to
embark on M&As (Seth et al., 2000). Managers want firm growth for several reasons. One of
them is the salary paid to managers as it is a function of the size of the firm (Mueller, 1969).
Motives like power and prestige are also stressed (Ravenscraft and Scherer, 1987): for
instance, managers in large companies have an easier route to senior positions in committees
and on boards of directors (Pfeffer and Salancik, 1978). While managerialism has been
proposed as a motive for domestic M&As, it may also be relevant for cross-border M&As if
managers have the incentive and the discretion to engage in M&As aimed at empire building
(Seth et al., 2000). However, by acquiring foreign rather than domestic company, managers
may still seek to stabilise the earnings stream of the company (Mohammed et. al 2016).

3.4. The main issues and challanges of huge investments in CM&As in the
digital era
As can be seen, there are a lot of strategic motives for cross-border M&As but like in every
strategic plan, the positives must not hide the negatives. () claims that there are few negative
factors that must be taken into consideration.
a) Tax- every country has different laws and getting blindsided by tax regulation can be
costly. Using a local professional can help with the complicated nature of international
tax.
b) Regulatory landscape– regulations and laws may not stay stagnant in an economy so
businesses must investigate the most obvious ones within the target sector.
c) Financial information – sometimes can be hard to obtain the availbility, reliability, and
accuracy of the target's financial information as decisions are often made without the
full picture.
d) Political landscape- political stability of the country can also blindside in form of a
change in Government
e) Compliance– these vary country by country, anti-money laundering regulations, anti-
bribery and etc.
4. METHODOLOGY
4.1 Research Methodology:
Introduction: research methodology forms one of the most significant part of any dissertation.
It works as one of the most intriguing aspects of the entire research work. It is used in drawing
all the relevant and important conclusions from the research work, which has been performed.
With this research on the strategic motives of companies for cross-border M&A in the digital

era, there are specific set of research methodology, which needs to be employed in order to
perform the entire task. As a result of which, this research works on the different aspects of
the research which is required to perform research of this kind. The research is prepared with
the use of different kinds of techniques, which are necessary to be adopted for the successful
accomplishment of tasks of similar nature. This allows the researcher in making a proper
explanation of the analysis and methods of the research mechanism, which needs to be
adopted for understanding the impact of the different motives for the cross border mergers
and acquisition in this era of digitalisation. All the aspects of the secondary data which has
been the primary source of this research has been used and depicted in the section of the
research methodology. All these important considerations, makes research methodology, one
of the fundamental features of any research dissertation. This portion of the entire dissertation,
contains all the ways, through which the entire research was conducted. In this way, it helps
the users of the research, of understanding the way the research as actually conducted and
carried out. This specific chapter would thus help in exhibiting the most significant steps,
which were taken, for the successful implementation of the entire research project.
4.2 Research Onion:
Research onion, is a comprehensive pictorial representation of the different contents of the
methodology section of any research dissertation. It forms one of the ancillary parts of any
research project. It helps the reader and the user of the research, in carefully depicting all the
relevant processes and steps, along with their stages, which were undertaken in the successful
accomplishment of the venture. The outer layer of the onion, gives a brief overview of the
entire research, on the other hand, the inside part of the onion, gives its users a brief insight
into the other significant features or the inherent features of the entire research project. It
gives the researcher all the information of the different kinds of supplementary steps which

had been taken for the successful completion of the project. A pictorial presentation of the
research onion has been provided below:
Figure 1: Research Onion
(Source: Sarantkos, 2012)
4.3 Research Design:
It refers to a specific set of methods, processes and steps which are employed and used in the
entire process of collection, designing, analysis and creation of the entire framework of the
entire research project. It gives a framework, which helps in guiding in the collection and
presentation of the diverse features of the examination, particularly the selection of the
various research variables. A research design helps in identifying and accumulating the
different variables of research and other important components of the research, under a single
roof. It gives a brief idea about the different types of dependent and independent variables,
which had been employed over here.

4.4 Research Philosophy:
Research philosophy, again forms one of the vital portion, which sets the tone of the steps to
be adopted and followed in the successful completion of the entire project. There are mainly
three different kinds of research philosophies, which are generally adopted in conducting a
research. These have been explained below:
 Positivism philosophy
 Interpretivism philosophy
 Realism philosophy.
A pictorial presentation of the different research philosophies has been given below:
Figure 2 types of research philosophies
(Source: Author’s own creation)
Either one of these research philosophies occupy a significant place in any kind of research
dissertation. Each on signifies a significant aspect of the research and sets the tone for

carrying out the work of the entire research. Each of them have been explained here vividly,
each one serving a specific set of requirements and needs. Positivism refers to that philosophy
of research, where the statistical data and figures are taken into account in a very positive an
optimistic sense. Interpretivism is quite different from it, it includes a situation, where the
entire research is being done based on a social issue, which has its implication on the society,
and which concerns the society as well. In such types of scenarios, the attitudes, the
temperament and cultures of the people of the particular of the society, becomes very
important and significant. On the other hand, realism, can be described as the perfect mixture
of the two. In the case of realism research philosophy, human emotions are taken into
consideration along with all the different sets of data are also taken into account for the
purpose of effectively conducting a research. For the purpose of knowing the causes into the
growing number of cross border mergers, the case of positivism has been taken here. This is
because this specific set of research research is majorly dependent on the convolutions of the
human psychology along with various other sets of data, apart from human psychology. Thus,
in this regard of conducting the research, more amounts of secondary kind of data has been
used in here.
4.5 Research Approach:
Research approach refers to the way the research has been approached into. The research
design has chiefly been classified into two primary parts, which are the inductive method and
the other approach being the deductive method. They are again chiefly categorised into four
core categories, which are quantitative, qualitative, pragmatic research method which also
goes by the name of mixed methods and lastly the emancipatory method approach. The
inductive one comprises of the emancipatory and the mixed approach. On the other hand, the
deductive approach comprises of both the quantitative as well as the qualitative approach
method. The pictorial presentation has been given below:

Figure 3: types of research approach
(Source: Author’s creation)
Inductive research method refers to that kind of research where both the aspects of theory as
well as the model which has been created by the examiners are taken into consideration. Thus,
it is possible to argue and well conclude that both the theoretical and the model aspects are
taken into account, it can be labelled as the inductive research method approach. In this
examination work related to the causes of the motives of the various cross border mergers, the
deductive research approach system has been applied (Mackey and Gass, 2015). This is for
the reason that for the purpose of implementation of this research, the viewpoints of the
authors who have carried out past research on analogous types of topics have been analysed
and have been taken into account. In order to efficiently accomplishing the entire
investigation through utilisation of the essential secondary data, the researcher of the present
research would study the conclusions which have been used by the past researchers and
authors.
4.6 Data Collection:
Data collection is an important aspects of conducting the research, where the different aspects
of the data is being collected and are used for processing purposes from selected sources. The

data collected from the diverse sources would eventually influence the quality as well as the
conclusion of the research (Lewis, 2015). For the purpose of making sure the authentication
of the results of the research, it is very essential to ensure that the data collected is genuine
and verified.
There exist mainly three varieties of data collection methods, which are as follows:
 Qualitative method
 Quantitative method
 Mixed method
A graphic illustration of the kinds of data collection approaches has been provided below:
Figure 4: Various kinds of data collection methods
(Source: Author’s own creation)
Qualitative methods: it refers to that kind of data, where those aspects are taken into
account, which cannot be quantified in any terms. These kinds of methods make use of in
depth interviews, focus groups of various kinds. Here the primary aim remains to collect

information which is not measureable in nature (Haegeman et al, 2013). Such methods are
useful in those kinds of cases and research where the deep introspection of the human mind is
involved or where the information relating to any person’s psychology is involved. These
kinds of methods are useful in cases where the aspect of human psychology is involved as
these kinds of cases cannot be quantified in any form.
Quantitative methods: Quantitative data on the other hand, refers to that kind of data, where
the collected data can be measured and can thus be put into quantified terms. It primarily
focuses on the numerical data and is needed when there arises a need for making any accurate
kind of data and research requiring logical solutions involving great use of numbers (Yilmaz,
2013). It chiefly comprises questionnaires, data and sums, experimental studies etc. The
various prominent methods have been explained below:
 Interviews: Interviews refer to the formal meeting between two people, sometimes
even more than two, particularly between the interviewer and the interviewee. Here
questions are asked by the interviewer with the objective of extracting useful
information about the interviewee, in order to assess his suitability and his eventual
selection.
 Questionnaires: They refer to the list of research related or survey related questions,
which are asked to the candidates, audience or respondents and which are designed to
extract specific information. It is created for the purpose of collection appropriate data,
making the data comparable for analysis purposes, and for making relevant conclusion
about the same. The different questions which are to be asked are addressed in the
form of these questionnaires and are distributed for the same inquisition purpose. It
thus can be regarded as one of the most effective and one of the easiest routes of data
collection.

 Experimental Study: It contain arbitrary obligation of the participating variables into
different groups, so as to regulate the underlying consequence of a convinced
situation, on a certain determined outcome. They are one of the most effective aspects
and part of the quantitative research study.
Mixed Methods:
Mixed method research of data collection is one of the other effective methods of data
collection. Here the researcher or the team of researcher as the case may be combines with the
elements of both quantitative along with the qualitative elements, including analysis of data,
techniques of inferences, for a broader understanding and depth of corroboration. Here the
basic strategy on which the method is based on refers to the integration of the different
aspects and features of both the qualitative as well as the quantitative data. This integration of
data helps in providing increased and improved amount of authenticity into the results of the
study.
In order to conducting this specific investigation regarding the strategic motives of companies
for Cross-Border Mergers And Acquisitions in the digital era, the inductive, qualitative and
the secondary form of data has been used.
4.7 Sampling method:
Each research work is considered as complete only and only when sampling work is done for
such kind of research work. It is one of the vital cogs of the entire research paper as it helps in
providing real time information and the type of data to be used for the entire research
(Emerson, 2015). First and foremost a researcher resorts to two of the following research
sampling methods which are:
 Probability Sampling
 Non-probability Sampling

. In the case of probability sampling, mathematical aspect is being taken into consideration
and mathematics plays a huge part. On the other hand, in case of non-probability sampling, all
the respondents are predetermined and all the data collection is taken and random selection is
done. In this case, probability sampling has been used, for the wide range of data involved.
5. ANALYSIS:
The objective of this new subject based studies is to discover why “Strategic motives
for cross-border mergers and acquisitions in the digital era”. As in keeping with this method,
researcher wishes to investigate each merger to appraise the additions or misfortunes
associated with various parts of the merger technique that allows to realise the pick up or
adversity from the whole merger exchange. In this chapter researcher will analyse the
strategic motives of the mergers both in the domestic as well as in cross-border market.
Through utilising the motives of the cross border merger during the digital era, this section
will emphasis on finding the different factors that enable the firm to go for merger.
5.1 Motive of cross border merger and acquisition:
Bonnin et al. (2014) has argued that there are three main factors that determine the
merger and acquisition during the digital era. For instance, there is deal-specific, industry
specific and firm-specific factors that determine the motives of the M&A. As per the Kotz and
Schmidt (2017), it can be seen that banks independently examine development fees, and
alternatives up from lengthy haul operating effectiveness accumulating to the joined
association. Simply, one of the objectives of those examinations is to isolate the highlights of
any merger. They moreover have a look at the manner and timing issues encompassing the
assembly to a solitary operating condition, as it is incredible that it will increase as mergers
emerge while the process of progress is completed early. Furthermore, Baker (2016) has
highlighted that Cumulative Abnormal Returns (CARs) subsequently determine the aggregate
values incorporated within the firms to determine the post operational mergers. As per the

same researcher, it can also be found that the basic objective of the M&A within the banking
sector lies within the technological advantage, competitive advantage and operational
advantage of the merger gained by the merging banks. However, analysing the literary
evidences, it can be seen that most of the researches has failed to provide any concrete idea
how the different factors of mergers operate simultaneously.
As one of the main motive of the cross border merger, it can be seen that horizontal
merger is one the main instrument that trigger the good offering to the merging banks and
comparative advantage, which is essential during the present banking sector of digital era.
Then again, Ryan (2016) has highlighted that it is also true that combination merger between
the banks irrespective of their origin takes place between the firms so as to gain market
augmentation and the same research has indicated that under the digital era, aggregate
merger’s basic role is to broadening the market intensity and operational performance of the
bank in the capital market.
Apart from this, performance analysis of the M&A highlights that the relation between
the present and post-merger performance of the firm lies within the study of long run impact
of the M&A. If the BHAR methodology is utilised so as to trace the performance of the
banking merger, then it can be seen that the buy and hold methodology is one of the best
suited reason that allow the banks to operate freely under the guidance of the large banks.
This gives free hand to the operational freedom to the banks with restrictions of expanding
and within this controlled environment it allows the banks to expand regional market share.
Through this, duing the post-mergers banks tries to reduce their operational cost and
rebalance the biasness within the firm while adding constantly to the market index for the
better performance of the same.
As per the Cost Profit analysis of the Merger and Acquisition, it can be seen that, Chu
et al. (2016), has highlighted that EU banking industry has reduced by 20% during the last

two decade and as per the observation, agency theory has highlighted that reputation of the
banks and the personal gain of the mangers has led to M&A in the banking sector. Post-
merger efficiency is one of the main reasons that has influenced the banks to go for mergers
and under the deteriorating financial condition of the small banks along with the poor
technological growth has enhanced the probability of the banks to merge with each other.
Financial earnings created by M&As in operational skill ability or increments in order
to promote the better management and profitability of the same. Merger-instigated upgrades
in operational talent can be tried straightforwardly by means of looking at post and pre-
merger degrees of fundamental accounting proportions or extra muddled bounds primarily
based on effectiveness measures. The consensus see with admire to mergers of budgetary
companies amid the 1980s and mid 1990s that accounting percentage, price talent, and benefit
effectiveness upgrades had been complicated. any other strand of the writing adopts a extra
entire strategy and utilizations 'event reflect consideration philosophy to test the stock or
security put it on the market response to M&A declarations.
Though there is different prospect in the M&A in the different economy, one thing
over the time has remained constant is that the technological naivety of the banks. As per the
Siegel (2016), it can be found that due to the merger there has been rise in the performance in
the EU banking sector, whereas, in case of the US banking sector, it has showcased a fall in
the performance. This paradox can be explained through the technological difference between
the banking sectors of the two different region. As per the Farouk et al. (2017), it can be seen
that, US banks are technologically upgraded compared to the EU banks, however, if cross
border mergers between the US and EU banks takes place, then EU banks face higher amount
of performance growth during the post-merger. On the other hand, US banks face fall in their
performance, due to the debt burden of the EU banks. Considering the present economic
downfall in the EU banking industry, it has also been observed that the cross border mergers

between the US and EU market has also reduced and fall in the same is as high as 2.44%
showcasing the fall in the interest in case of cross-border mergers.
5.2 Cross border M&A scenario during 1988 to 1997:
Figure 5: Summary statistics of M&A took place during 1988 to 1997
Source: (Mare 2015)
From the figure 5, it can be seen that the agreement with regard to event investigations
of bank M&As during 1990s was that, with the aid of a huge, targeted investors earned stable
high quality anomalous returns, bidder received barely negative returns, moreover, joined
peculiar returns had been factually unimportant or financially paltry (Johan 2018). However,
it may comes approximately because of M&A execution examines disbursed since 2000
become independent from this pre-2000 settlement. Usually, the continuing writing proposes
that both EU bank merger and North American mergers are effectiveness improving, however
simply EU financial institution deals have delivered approximately investor esteem upgrade.

Figure 6: Consolidation of banks between 1985 and 2006
Source: (Bonin et al. 2014)
The most explicit pronouncement of merger-incited financial benefits within the UK
banking sector originates from organisation's money related articulations: either instantly
proportion research or proficiency borders got from economic proclamation facts. As an
example, (Boschma and Hartog 2014) located proof of critical cost diminishments of their
research of U.S. financial institution mergers amid the 1990s, yet simply next to enhancing
the information for merger accounting regulations. Predictable with this as it can be seen from
the figure 6, Bonin et al. (2014) determined that financial institution preserving enterprise
mergers at someplace within the range of 1987 and 1998 produced generous gain choices as
post-merger situation was beneficial due to the cross border merger that subsequently
enhanced the technological advancement of the banks, especially in case of the EU banking
sector. Subsequently enhancing every year BHC sanctions forced the banking organisations to
the normal commercial enterprise viewpoint. Lebedev et al. (2015), showcased that
determined affirmation of earnings effectiveness upgrades for expansive mergers, item

engaged mergers, and land focused mergers. Pohl and Tortella (2017) applied an intrinsic way
to cope with analyse the highlights of acquired banks during 1996 to 2003 and displayed that
price-talented banks will be subject to acquiring their extra wasteful companions; this finding
recommends the presence of capability put up-merger execution profits. Rao and Salaber
(2016) located that comparatively larger BHCs that move in new public showcase someplace
during 1972 and 2002 where cross border merger was initially influenced by the performance
of financial terms as well as technological parameters of the banks. Pohl and Tortella (2017)
utilized accounting statistics so as to study financial institution M&As in the UK banking
sector and found that during 1996 and 2004 UK banks tend to middle around profits post-
merger notwithstanding the truth that this doesn't result in greater execution as prices
increment.
Lazarides and Drimpetas (2016) contended that simply assessing the effect of a merger
on the becoming a member of congregations can also omit a whole lot impact of that merger.
Apergis et al. (2016), assessed the reply of non-blending commercial institutions operational
in the financial sectors where union came about; their discoveries recommend that the
officeholder banks endeavoured crucial activities to live suitable within the new post-merger
cantered situation. Occupants essentially enhanced their proficiency towards M&A through
utilisation of the maximum noteworthy adjustments within the business sectors where the
capability for developments become most noteworthy, for instance, in business sectors in the
beginning portrayed by huge market and eventually it perpetuate into small market as the
demand of the same starts to get saturated. Chiaramonte and Casu (2017) overlooked to
discover decisive proof that mergers make an incentive for sizable financial institution deals
somewhere within the time frame ranging from 1985 to 1996. Cummins et al. (2015)
observed terrible outcomes back to the buyers in sizable bank deals someplace inside the
range of 1987 and 1998, and further diminishments in post-merger benefits, credit score fine,

and rate income. (Caiazza and Pozzolo 2016) observed that engaged financial institution deals
that is, bargains wherein the consolidating banks hone comparable methodologies regarding
object contributions or topography enhance investor esteem by way of round 3%, but non-
focused bank mergers don't make esteem. (Apergis 2015) observed diverse affects for
cantered arrangements formerly and following geographic deregulation (Riegle-Neal Act).
It has been determined by the researchers that topographically engaged M&A had
been augmenting with abnormal returns and in any case, inside the deregulation duration
mergers indicated less accomplishment than extending mergers. These deregulation, when the
chance of potential passage stored descending weight on internet sales. Associate picks up
have been related to an intensive kind of market and firm-specific variables. Angwin et al.
(2016) located that bank takeover premiums had a tendency to be higher for greater efficient
banks. Du and Boateng (2015) observed that with M&As bondholder increases because of
lessened merger cost of obligation. Du and Sim (2016) establishes that takeover hypothesis
yields notable comes to bank traders, at the same time as cautious acquisitions meant to
counteract takeovers ruin investor esteem. Long (2015), prominent investor increases
identified with the pre-merger 'practical' development rate (that joins bank's arrival on
resources, profit pay-out, and fee capital share) of the acquirer and it enhance the motivation
for the cross border merger with the during the present date of digital era.
As per the Antoniadis et al. (2014) UK common reserve mergers somewhere within
the time frame of 1994 and 1997 and located that stock traders experienced advantageous
irregular additions, gaining reserves experienced and poor past reserve execution improves
the probability of procurement for specific forms of belongings. Bauer et al. (2009) utilize an
occasion have a look at way to cope with studies application increases identifying with credit
score association mergers somewhere inside the range of 1994 and 2004 and find out

affirmation of additions to the owners/people from target credit score institutions and to the
controllers, but no longer to the acquirers.
Figure 7: Cross border M&A between 1985 and 2006
Source: (Bonin et al. 2014)
A significant volume of concentrates as of overdue on European financial institution
mergers give convincing confirmation of execution upgrades. Abbas et al. (2014) inspected
53 European financial institution M&A's someplace within the variety of 1994 and 1998 and
observed proof of fee productivity changes and fine, but moderately little, gain proficiency
picks up. Other field EU investigations discover productiveness or/and advantage alternatives
up submit-merger (Gambacorta and Shin 2016). Those examinations additionally proposed
that engaged arrangements wherein the blending banks rehearse comparative approaches
(Hagendoff and Nieto 2015), and moreover bank-to-financial institution mergers, will be
inclined to carry out better concerning effectiveness and advantage execution. Exceptional
examinations locate that put up-merger gain exchange can require a long term to expose up
(Renneboog et al. 2017). (Rao and Reddy 2015) advocated that deliberate effectiveness picks

up at the bank stage may veil hurtful impacts at the market stage; in their research of
marketplace manage in EU saving money (using the Lerner record), they discover that
solidification drove down minimal fees speedier than yield expenses, presenting a variety in
exhibit influence. Evidence from unmarried-nation ponders has a bent to affirm the
discoveries from the field European investigations. (Du and Sim 2016) inspected post-merger
accounting execution, and additionally investor riches influences, for an instance of Italian
financial institution mergers somewhere inside the variety of 1992 and 1997; they find that
advantages decorate post-merger.
Comparable impacts have been located by using (Abbas et al. 2016) who utilized an
assortment of estimation processes (Trans Log, Fourier, and Cubic Spline Cost Capacities) to
foresee scale-associated fee impacts from 22 mergers along with Spanish funded banks
someplace within the variety of 1986 and 2000. They observed that unit expenses fall by way
of zero. 5% submit-merger, boosting returns by way of round 4%. So also, Cummins et al.
(2015) set up that the value productiveness of Spanish banks more advantageous somewhere
within the range of 1986 and 2002 amid a time of aggregate, because of a terrific volume to
decreases in negligible fees. Apergis et al. (2016) inspected the cost talent highlights of
Norwegian banks (utilizing the cubic spline technique) someplace inside the variety of 1987
and 1998 and observed evidence of cost changes coming approximately because of mergers.
To place those will increase in context, the creators noticed that the merger-instigated
value upgrades were now not as expansive as those obtained whilst banks changed from
paper-based totally to electronic instalments frameworks. (Karolyi and Taboada 2015) located
that unique approximately portion of German bank mergers amid the 1990's were fruitful in
improving taken a toll productivity and that those price proficiency choices up took as much
as seven years to absolutely emerge. (Galan et al. 2015) determined evidence of fee (but not
gain) skill ability improvements in German bank deals someplace in the variety of 1995 and

2000. Ashton and Pham's (2007) research of 61 UK bank mergers somewhere in the range of
1988 and 2004 determined productivity changes by way of and big, but little confirmation that
cost funds have been created via decreases in retail keep charges. Conversely, Cummins et al.
2017 observed that mergers of Spanish investment budget banks had no effect on
effectiveness; prices at combining reserve funds banks ascended at an indistinguishable rate
from the (non-consolidating) enterprise regular over the 1986 to 1998 duration. Molyneux et
al. 2014 located that insurance enterprise mergers in Spain somewhere inside the variety of
1989 and 1998 introduced about profitability enhancements. Chiaramonte et al. (2015) event
contemplate investigation of Italian bank mergers someplace within the range of 1992 and
1997 likewise discovered tremendous investor riches impacts.
4.3 M&A situation in the EU banking industry:
Schoenmaker and Peek (2014) applied an instance of 98 massive EU bank mergers
during the time period from 1985 to 2000 in order to look at the carters of overabundance
returns. They additionally observed that over 60% of all exchanges esteemed making.
Outstanding growth impacts have been located to be more noteworthy for non-expanding
exchanges, when acquirers concerned with less M&A exchanges, and while the targeted
showed poor beyond stock execution. Ijtsma et al. (2017) analysed 244 European bank M&As
someplace in the range of 1998 and 2002 and explored each investor esteem affects and
further pre-and put up-merger benefits and effectiveness. They observed confirmation of
wonderful atypical comes back to targeted investors, and remarkable enhancements in the
objective bank's budgetary execution round two years following the fulfilment of the
alternate, and not using a large effect on bidder's stock costs. Menicucci and Paolucci (2016)
discovered that the additions for target traders exceed the misfortunes for bidders in move-
outskirt bargains consisting of EU, U.S., and furthermore determined that the procured banks
were reasonably taken a toll powerful. mare (2015) each applied event contemplate methods

to cope with inspect bidder returns which include European financial institution M&As; the
previous research discovered high quality unusual returns for financial institution/non-bank
deals, even as the ultimate exam discovered greater esteem upgrade for financial institution-
to-bank mergers before the reception of the euro in 1999.
5. CONCLUSION AND RECOMMENDATION:
The general discoveries of the merger and acquisition brings up the problem of why
bank consolidation takes place and how the cross border merger during digital era is
problematic for the banks. On other hand, it has also been found that though technological
difference among the merging banks is one of the crucial point, yet different factors ranging
from personal interest of the managers to high debt of the banks lead to the mergers.
Numerous answers to this inquiry have been presented throughout this analysis and as the
outcome, the first of these is that the rivalry among the firm is provide good amount of impact
on the mergers.
This complexity among the administrative behaviour of won and acquiring banks
under the operational and regulatory framework is tricky. It appears if leader behaviour is
driven without every person else's input, rather than really increasing marketplace esteem, at
that factor the behaviour of administrators on the two sides of the transaction should be
affordable using a similar worldview. It is genuine whether one seems accounting records or
the marketplace estimation of cost while M&A, however, it is true, during cross border
mergers banks look into the consolidation value and the value of abnormal return from the
stock within a specified time period for the merging bank. A whole lot additionally anxious is
that the market cannot precisely conjecture a definitive achievement of singular mergers, as
shown with the aid of the nonappearance of any relationship among modifications in
accounting - primarily based performance measures and securities alternate returns around the

merger declaration. In fact the merger wave that has cleared the US recommendations there
may be increasing proof of a comparative move in Europe.
As per the above analysis regarding the motive of the cross border mergers and
acquisition, following recommendations can be made:
a) No matter the deregulatory measures taken by using the EU within the 1990s, no expansion
in the cantered rivalry amongst banks may be valued. In this regard, the enlargement in the
degree of grouping of EU banks as an outcome of the rush of mergers that came about during
the 1990s may additionally have brought on a diminishment within the performance
parameters. Thus, under the rising and alongside those traces, a ramification within the market
depth of firms, which as a consequence causes upward weight on top class edges.
b) Detrimental consequences of decreasing aggressive competition in the banking sector have
been balanced with the aid of the effect of the fall in running charges and credit hazard.
Notwithstanding the truth that the lower unpredictability of marketplace financing prices has
introduced to the decrease of top class edges, however, the effect has been little. Under this
scenario, it would be ideal for the banking authorities to look into the factors that will lower
the unpredictability within the market place allowing the banks to have higher incentive.
c) The adjustment in the salary structure of EU banks has implied a broad impact within the
Saving Money Commissions and it has influenced the performance of the domestic banks as
well. Under the enhanced liability of the banks in case of mergers and acquisition, it would be
ideal to bring in simplified norms that can influence the merger and acquisition.

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