Location Strategies and Value Creation of International Mergers and Acquisitions

Ludivine Chalençon

• Publisher: Wiley-ISTE
• Year: 2017
• ISBN:
  9781119340935
• Edition: 1
• Topic: Negocios y empresa
• Subtopic: Formación empresarial

This title enriches both areas of research, finance and international management to analyze the choice of location and value creation in mergers and acquisitions. Our research answers the following question: What are the determinants of the location and value creation in mergers and acquisitions?

PART 1
Location and Performance of Mergers and Acquisitions

Introduction to Part 1

We begin with a literature review of research on mergers and acquisitions. We then retrace the reflection that led us to elaborate the research model we used to investigate our research issue.

In Chapter 1, we present the characteristics of mergers and acquisitions as well as the current dynamics of their location. To do so, we begin with detailing the modes in which mergers and acquisitions are performed, and then investigate the issues of international development via mergers and acquisitions. In a context of economies becoming increasingly global, mergers and acquisitions become a mode of entry of choice for companies wishing to establish themselves in foreign markets. However, despite the significant growth opportunities they offer, mergers and acquisitions also involve a significant level of risk. In this chapter, we base our thinking on the current stakes involved in mergers and acquisitions and formulate research hypotheses, aiming to identify the key factors that lead companies to conduct mergers and acquisitions in mature countries rather than in emerging countries.

Chapter 2 investigates the performance of mergers and acquisitions. It begins with an overview of the main theories that explain the underlying motives for such operations. Such motives are internal as well as external to the company. Research works from industrial economy, informational efficiency and organizational finance are thus detailed. The aim of this part is to discern the main leverages of performance of the current mergers and acquisitions. Our conclusion of this chapter consists of detailing the empirical studies that focus on estimating the performance of mergers and acquisitions. We present an overview of the state of the art of measures and results that can be found in the literature. Throughout the development of this chapter, we formulate our research hypotheses about the factors that explain the value creation of mergers and acquisitions.

1
Characteristics and Location of Mergers and Acquisitions

That which is sought is found; the unheeded thing escapes. Oedipus the King, Sophocles

This chapter focuses on the characteristics of mergers and acquisitions, a mode of development frequently used by companies. This chapter recalls the many research works that have been carried out on the subject in order to better our understanding of the main modes of conduct of mergers and acquisitions. We present their typology and dynamics, which enables the reader to get a grasp of their specific features and to apprehend the diversity of form, nature, and characteristics that such operations can have. Our work then focuses more specifically on international mergers and acquisitions. The current trends of this mode of entry into foreign markets are thus presented. The theories about the internationalization of companies and especially the eclectic paradigm enable us to explain, at least partly, the strategic choice to internationally expand by means of mergers and acquisitions.

The second section highlights the stakes involved in international mergers and acquisitions in the current economic environment. Such operations are a mode of entry of choice for companies that wish to approach a new country or strengthen their position in a country where they are already established. The motivations must therefore be investigated in a broader perspective than that of the essential characteristics of the target company, as all the specifics of the whole country of location can prove to be determining factors. In other words, geographic distance, economic growth, the quality of institutions and cultural differences all influence the decision to endeavor an international merger and acquisition. These influence are investigated in this chapter, which results in us elaborating and formulating our research hypotheses.

1.1. Modes of conduct of mergers and acquisitions

Mergers and acquisitions have adapted to the changes in the global economic environment. Throughout the past few decades, they have evolved and differentiated so that they now invoke various characteristics and motivations. If we want to refine our understanding of the main characteristics of such external growth and development strategies, we need to elaborate a typology of mergers and acquisitions. Authors have developed several theoretical foundations to account for the goals and objectives of such operations. Their theoretical developments discern that, despite the attractive growth opportunities offered by a merger and acquisition, a company which commits to such a strategy must also face significant risks inherent to international mergers and acquisitions. Throughout the development of this section, we elaborate our research hypotheses about the modes of conduct of international mergers and acquisitions.

1.1.1. The characteristics of mergers and acquisitions

The term “mergers and acquisitions” in fact lumps together a variety of operations that have very heterogeneous forms, natures and characteristics. Their goals in terms of realizations as well as their legal, fiscal and accounting requirements can be specific to each merger and acquisition. Sudarsanam [SUD 10, pp. 2–3] defines them as follows: “In a merger, the corporations come together to combine and share their resources to achieve common objectives. The shareholders of the combining firms often remain as joint owners of the combined entity. An acquisition resembles more of an arm’s-length ...

Table of contents

• Cover
• Table of Contents
• Title
• Copyright
• Acknowledgments
• General Introduction
• Part 1: Location and Performance of Mergers and Acquisitions
• Part 2: Methodology of the Empirical Study
• Part 3: Location and Value Creation of Mergers and Acquisitions by French Acquirers
• General Conclusion
• Appendices
• Bibliography
• Index
• End User License Agreement