Global Mergers and Acquisition
International mergers and acquisitions are when a company joins or purchases another company and does so across national borders. Though the terms are often used together, sometimes even reduced to M&A, a merger and an acquisition are not the same. A merger is when two companies, usually of similar size, agree to combine forces and to become a single new company. Some mergers are in name only, so-called in order to avoid ill-feeling or panic over what is truly an acquisition. Acquisitions involve a different power dynamic — one company buys another and absorbs its assets.
Another name for these deals is global mergers and acquisitions. Another term, cross-border mergers and acquisitions, can be used to mean the same thing, although it is perhaps more frequently applied when the two countries involved are neighbors, however.
There are two main ways in which multinational companies benefit from international mergers and acquisitions: ease of transition into the new market and improved economies of scale. A company might enjoy quicker access to local assets, logistical support, market know-how, and brand name awareness — factors that can greatly assist a company’s establishment in a new market. The other major benefit, economies of scale, is relevant to any type of expansion and refers to the cost advantages that larger companies commonly hold over smaller ones.
These mergers and acquisitions also tend to encourage foreign investment. Investors frequently perceive investing abroad to be less complicated, and perhaps less risky, when it is through a multinational company that also operates in their home country. This can help to bring new money, technologies, products, and services into countries, though local competition can often suffer if multinationals come to dominate a market. As with domestic markets, there are many heated debates over the limits that should or should not be set regarding the expansion of big businesses.
Business mergers and acquisitions in general are often complicated, but international ones can present some unique legal and political challenges. While many countries are liberalizing their international economic policies, others are moving in the opposite direction. Some countries have very strict regulations related to foreign companies buying or combining with local businesses and, in certain industries, forbid the practice altogether. As the world continues to globalize, rules and restrictions are in constant flux. There are now many consultants who specialize in helping companies navigate the seas of ever-changing information necessary to conduct such mergers and acquisitions successfully.