International Financial Management: Merger and Acquisition Analysis

This report delves into the realm of international financial management, with a specific focus on mergers and acquisitions (M&A). It begins with an executive summary outlining the key aspects of international finance, including foreign direct investment and exchange rates. The report then provides a detailed appraisal of M&A, exploring its role in fostering growth and development, particularly in countries like the UK and the USA. It differentiates between conglomerate and congeneric mergers, alongside horizontal and vertical mergers, and examines the factors driving M&A activities. Furthermore, it includes a comparative analysis of M&A practices across the USA, Japan, UK, and Germany. The report also discusses international harmonization in mergers and acquisitions, emphasizing aspects like capital, cross-cultural considerations, and the role of the Euro. It concludes by highlighting the impact of M&A on organizational structure, employee dynamics, and taxation, providing a comprehensive overview of the subject matter.

International financial
management

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................1
MERGER AND ACQUISITION ...................................................................................................1
a) Appraisal of merger and acquisition and its related success..............................................1
COMPARISON AMONG VARIOUS COUNTRIES.....................................................................3
INTERNATIONAL HARMONISATION IN MERGERS AND ACQUISTIONS........................3
ORGANISATION STRUCTURE AND EMPLOYEE...................................................................5
TAXATION.....................................................................................................................................5
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................6

EXECUTIVE SUMMARY
In the economy there are various countries among which different monetary functions are
undertaken and in order to deal with them international finance is used which is a part of the
economics related to finance (Gugler, Mueller and Weichselbaumer, 2012). Wealth
maximisation is the main motive and for that the aspects that will be covered under this will
include foreign direct investment and exchange rate. In the report the factors in relation to the
merger and acquisition will be discussed that will be made in four countries. The international
harmonisation that will be occurring will also be analysed here under.
MERGER AND ACQUISITION
a) Appraisal of merger and acquisition and its related success.
In the growing environment the main aspects which is used by the countries and nations
in order to achieve the development and growth is merger and acquisition. The main motive with
which the merger is undertaken is to receive the synergy (Cooper and Finkelstein, 2014). The
main countries who brought this idea are UK and USA. With the help of this the companies will
be able to diversify and will be able to perform its functions in more effective and efficient
manner. The merger can be carried out by any organisation in two ways and the same have been
described below:
1. Conglomerate merger: In this type of merger the companies from different industries
will be combined. This will be required to be done when the main focus will be on
trading in the market segment that will be new for them. The business in which they
operate can be different and the also the merger can be conducted and the parties to it will
not be each others contenders. The main factor due to which they merge is the point of
view and there are no covering segments which are involved in it. There are various
factors due to which they will be willing to get attached with each other and they include
advancements, development, other incentives or if there is some monetary aspect
involved.
The main reason of the increase of the mergers and acquisition is the change which has
taken place in the national corporate administration system. The old activities such as cross
shareholding and bank firm association have declined in many countries and the changes in the
legal system has led to the more acquisitions. There were various such takeovers which were not
1

friendly and unconstrained that have taken place in Germany and Japan. In the creation of the
worldwide market in order to maintain the control in corporates, the main modification was
made by the takeover of Mannesmann by the Vodafone. In the Japanese economy there are
various issue which have raised in relation to the causes and results of the improvement which
has taken place about M &A (Holburn and Vanden Bergh, 2014). this can be performed in case
if the organisation are comparable with each other. As in this organisation will be performing the
functions so more resources will have to be stored so that business can be run in smooth manner.
2. Congeneric merger: In this the merger is carried out among the similar types of business
but the products which are made by them are different. The main benefit of this merger
that in this they will be able to use the same distribution channel and also more products
will be made with the help of this and thereby the cost will be reduced which will bring
additional advantage to them. Technology, assembling and all other will be used and
companies will be associated with them. The merger in this will be categorised in two
parts which will be including vertical and horizontal form which are explained in detail
below:
 Horizontal merger: The organisations which are involved in the similar type of market
segment will be utilising this merger. As they will be from the same sector so it is clear
that they will be competitors of each other and will be involved in the production of
similar goods so by the merger the risk of competition will be reduced.
 Vertical merger: In this the merger do not take place at the same level which means that
either it will be performed with the suppliers or with customers. This can be further
divided into two segments which will be:
Product extension merger: When the companies belong to the same sector but the products
which are manufactured by them are different but then also same in respect of the market area.
Market extension merger: In this type the product in which they are dealing will be same but the
market that will be used by them or can be said that of which they are part is different and will be
using separate markets to deliver their goods.
If a company want to enhance its presence across the globe with the help of M&A
strategy, the foremost factor is to address on the agenda means to address on the agenda refers to
the choice of acquisition mode, the external organisation made assumed by the target. Cross-
border faces in developed nations face two various challenging jurisdictions: civil law and
2

common law framework. In civil law nations, whose main source of law are written codes,
smaller firms often organisation. Small firms are often implement limited liability organisation.
While most of the big enterprises normally take the in the form of share organisation. The key
distinction among them are related to the ownership structure.
COMPARISON AMONG VARIOUS COUNTRIES
USA JAPAN UK GERMANY
The success of M&A
in USA is to get the
economies of scale in
order to gain the
optimum production.
The USA main aim is
to provides a healthy
competition in a
market. This is also
need to make their
business in a better
manner.
M&A are used to
expand business
operations so that the
firm could operate
their business in a
better manner. With
the help of M&A,
many of the firms
merged in order to
reduce the cost of
production.
M&A are the most
important tool which
are used in order to
attain the synergy
among the firms.
Under this country,
M&A becomes so
popular as there were
seen so many
advantages such as-
synergy, economies of
scale, expending of
operational business
activities, etc.
M&A in the Germany
attracts outside
companies due to the
so many factors. As
Germany is a sound
economy and have
firmly educated
workforce which
attracts the outside
investors for making
M&A deals to the
Germany.
The M&A in UK can be seen in the presented graphs.
3

INTERNATIONAL HARMONISATION IN MERGERS AND
ACQUISTIONS
In the business there are various functions which are performed and there are various
ethical methods that will be used and this process is known as harmonisation. In this there will be
various things to be performed such as laws and practices will have to be systematised so that
capabilities and respect will be obtained in the markets which are related to cash. By this the
information will be dispersed so that development can be achieved and also trading practices and
standards will be amended for the betterment (Shi, Sun and Prescott, 2012). In the various
processes involved, harmonisation will be helpful in maintaining the business understand the
needs and also certainty will be maintained. By this goodwill will be enhanced so proper method
will have to be used in this. In order to maintain the coordination among the organisation it will
be required that all the standards shall be followed and other aspects of this are mentioned here
under:
 Capital: In Europe and US, there were various improvements which were achieved in the
monetary areas in M & A. In this respect the regards will have to be paid and the main
4

methods by which this can be done will be offers and money. Firstly offer will be
provided but if they are not proving to be satisfactory then the cash will be offered. In the
process of providing the motivation there are various ways which can be used and it
include cash, just the incentives or the combination of it together with the commitments.
They will be the methods that will be considered to be the most simplest methods in order
to maintain the harmony.
 Cross culture: In the market there are various people who will be acquiring the products
and they will be classified in various categories which are remote, outside parties and
families. In comparison to the Japan, US or the M & A, the bigger measures are
experienced by the European union. The share of the cross culture trade is around 40
percent in case of Germany and UK whereas In US it amounts to 25 percent. In the
Germany ans UK all the aspects are considered and they were the ones who are known to
be the introducer of such thing in the Eastern Europe. In order to make the people use
merger and acquisition in the competitive market the single market has played an
important role and also the Euro was introduced by which burden was made on Private
associations so that restrain of plenitude was reduced (Changqi and Ningling, 2010). The
finance was given a new way with the introduction of Euro as the risk of cash was
eliminated and fluidity was maintained in majority of the market.
In relation to the outsiders, bargainers there were various incentives that have been
arranged. In relation to USA or japan, the support in respect of the bargain power was provided
in Europe. The cross border incentives and commitments were maintained for the growth of
merger and acquisition out of which the majority of the benefits were received by UK and
Germany which were determined to be around 80 percent of the total and the remaining share of
the growth was achieved by US and Japan (Phillips and Zhdanov, 2013). The outside references
and distant takeovers will be carried out in the UK market. In case of Germany Cross Fringe will
be used to increase the acquisition and the colossal increase in the local settings is the reason by
which it will be enhancing in Japan.
5

it shows the merger that took place in the US and the fluctuations which are occurring in the
country in the past years.
ORGANISATION STRUCTURE AND EMPLOYEE
By using M&A, Organisation structure becomes change as this will expand the organisation.
Hence, this will also frame the structure of the organisation and employees of the merged entity
will also switch to the amalgamating entities so that the employees will increase with so many
workforce
TAXATION
Under Merger and Acquisition, loss making amalgamated entity can carry forward losses in the
forthcoming years and the amalgamating entity can use amalgamated entity's loss from its net
profits.
CONCLUSION
From the above mentioned report it can be concluded that in order to deal with the
competition in the most effective manner the countries will be using merger and acquisition as
the means. The gain will be achieved by them as they will be receiving the synergies and will be
able to achieve the targets and goals by increasing the market as they will be possible to reduce
the price by which growth will be acquired.
6

REFERENCES
Books and Journals
Gugler, K., Mueller, D.C and Weichselbaumer, M., 2012. The determinants of merger waves: An
international perspective. International Journal of Industrial Organization. 30(1). pp.1-
15.
Cooper, C.L and Finkelstein, S. eds., 2014. Advances in mergers and acquisitions. Emerald
Group Publishing.
Holburn, G.L and Vanden Bergh, R.G., 2014. Integrated market and nonmarket strategies:
Political campaign contributions around merger and acquisition events in the energy
sector. Strategic Management Journal. 35(3). pp.450-460.
Shi, W., Sun, J and Prescott, J.E., 2012. A temporal perspective of merger and acquisition and
strategic alliance initiatives: Review and future direction. Journal of Management.
38(1). pp.164-209.
Changqi, W and Ningling, X., 2010. Determinants of cross-border merger & acquisition
performance of Chinese enterprises. Procedia-Social and Behavioral Sciences. 2(5).
pp.6896-6905.
Phillips, G.M and Zhdanov, A., 2013. R&D and the Incentives from Merger and Acquisition
Activity. Review of Financial Studies. 26(1). pp.34-78.
Online
International harmonization. 2017. [Online]. Available
through:<http://www.investorwords.com15524international_harmonization.html>.
[Accessed on 8th August 2017
7