Cross border mergers and acquisitions : A Strategic Perspective

Abstract

Mergers and Acquisition (M&A) refers to a method of consolidation of companies. It is an inorganicgrowth strategy adopted by a company to diversify its business, expand the product portfolio andentry into new market, among several other reasons.A merger is a transaction that forms one economic unit from two or more previous ones. A merger isof two types: Consolidation (two/more entities merge to form a new one, no original entityremains) and Absorption (one company mergers into another and one entity continues to be inexistence). An acquisition, on the other hand, is the purchase of controlling stake or ownership ofanother company by a corporate entity. Unlike mergers, both entities remain in acquisition, only thecontrolling interest changes.Cross border M&A refers to M&A activity across international boundaries, wherein the partiesinvolved are located in different geographies. Their study form a great sense in today’s integratedworld where companies are expanding across geographies to tap growth opportunities.This project is a study of firms’ motives for cross border M&A and the decision factors involvedtherein. The project does a literature review on cross border M&A theories and merger motives.Two cross border M&A deals involving Indian company - TATA Corus acquisition and TATA JLRacquisition are analysed in the context. The rationale to choose these two M&A deals was that bothacquiring firms are part of TATA conglomerate. Based upon a study of these, recommendations aremade for success in cross border M&As