The international mergers and acquisitions (M&A) of transnational corporations (TNCs) involve enterprises in two or more countries, markets in two or more countries and legal systems under the control of two or more governments, where the "transnational enterprise of one country" is the enterprise from which the M&A is sent or the acquiring enterprise, and the "enterprise of another country" is the target enterprise of the M&A in the other country. The "one-country enterprise" is the M&A sending enterprise or the acquiring enterprise, and the "other country enterprise" is the acquired enterprise, also known as the target enterprise, in the other country. The channels referred to here include two forms of investment by the acquiring transnational enterprise directly into the target enterprise or through a subsidiary in the target country, and the means of payment referred to here include cash payments, loans from financial institutions, share-for-share exchanges and the issuance of bonds. The domestic merger and acquisition of multinational corporations refers to a multinational enterprise in its own country in some form of merger and acquisition of domestic enterprises.
Editorial content
Merger (Merge) refers to the absorption of the company, that is, a company will be one or more other companies into the company, so that it loses its legal personality behavior. It is one of the ways to change and terminate the enterprise, and is also a normal phenomenon of the survival of the fittest in the enterprise competition. In the western company cross-border mergers and acquisitions
In the enterprise merger can be divided into two categories, namely, absorption merger and the creation of mergers. Acquisition (Acquisition) means to obtain, that is, a company through the purchase of assets or equity of other enterprises, so as to realize the actual control of the company enterprise behavior. Take over (or receive) enterprise management or ownership of the meaning. According to its content, the acquisition can be divided into two categories of asset acquisition and share acquisition. From an economic point of view, the economic significance of mergers and acquisitions is the same, that is, they make the market power, market share and market competition structure changes, the same benefit to economic development, because the enterprise property rights of the management and management of the final control in the hands of a legal person. It is in this sense, the western countries through the Mergers and Acquisition together, collectively referred to as M&A. The meaning of enterprise merger and M&A similar to both refer to the absorption of mergers and acquisitions, issued by the ministry of finance on August 20, 1996, "merger of enterprises related to the financial issues of the provisional provisions of the" the second article provides that: "The provisions referred to in this provision refers to the merger of a company, a company, a corporation, a company, a company, a company, a company, a company, a company, a company, a company, a company. The merger referred to in these provisions refers to an enterprise through the purchase of other enterprises, such as the acquisition of property rights in a compensated manner, so that it loses its legal personality or retains its legal personality, but change the main body of the investment in a behavior. Therefore, in, usually the enterprise merger and enterprise acquisition are collectively referred to as enterprise mergers and acquisitions. Since 1995, the global wave of cross-border mergers and acquisitions, to 2000 into the climax, in recent years is back into the adjustment period. The value of cross-border mergers and acquisitions increased from $186.6 billion in 1990 to $1.1 trillion in 2000, and the share of cross-border mergers and acquisitions in global direct investment rose from 57% in 1995 to 85% in 2000. The total amount of cross-border mergers and acquisitions in the past three years has declined compared with 2000, but the main position of cross-border mergers and acquisitions in international direct investment has not been shaken.
Major types of cross-border mergers and acquisitions
Lateral cross-border mergers and acquisitions, vertical cross-border mergers and acquisitions and mixed cross-border mergers and acquisitions
According to the industry relationship between the two sides of cross-border mergers and acquisitions, cross-border mergers and acquisitions can be divided into horizontal cross-border mergers and acquisitions, vertical cross-border mergers and acquisitions and mixed cross-border mergers and acquisitions. Horizontal cross-border M&A refers to the M&A between enterprises producing or selling the same or similar products in two or more countries. Its purpose is to expand the share of the world market and increase the international competitiveness of the enterprise until it obtains the world monopoly position in order to seize high monopoly profits. In horizontal cross-border M&A, it is easier to realize M&A integration because the M&A parties have the same industry background and experience. Horizontal cross-border M&A is a frequently used form of cross-border M&A. Vertical cross-border M&A refers to M&A between firms in two or more countries that are in the process of producing the same or similar products but at different stages of production. The purpose is usually to stabilize and expand the sources of supply of raw materials or sales channels of products, thus reducing the supply of raw materials or sales of products by competitors. M&A parties are usually suppliers of raw materials or buyers of products, so they are more familiar with each other's production status Cross-border M&A
Familiar with the merger and acquisition is easy to integrate after the merger and acquisition. Mixed cross-border mergers and acquisitions are mergers and acquisitions between firms from two or more countries that are in different industries. Its purpose is to realize the global development strategy and diversification strategy, reduce the risk of operating in a single industry, and enhance the overall competitive strength of enterprises in the world market.
Direct and Indirect Mergers and Acquisitions
From the point of view of whether the M&A enterprise and the target enterprise are in contact or not, cross-border mergers and acquisitions can be divided into direct and indirect mergers and acquisitions. Direct M&A means that the M&A enterprise directly demands ownership from the target enterprise according to its own strategic planning, or the target enterprise takes the initiative to transfer ownership to the M&A enterprise due to poor operation and insurmountable difficulties, and completes the transfer of ownership after the negotiation and agreement between the two parties. Indirect M&A refers to the acquisition of control over the target enterprise through the acquisition of the target enterprise's shares in the stock market without sending a request for M&A to the target enterprise. Compared with direct M&A, indirect M&A is subject to greater constraints by legal regulations and the probability of success is relatively small.
Editing Advantages
Rapid Entry into Other Countries' Markets and Expansion of Their Market Share
There are two ways in which an enterprise of one country usually enters the market of another country: the first is to export its products directly to the other country. Due to the high freight cost of cross-border transportation and the obstacles of tariff barriers in other countries, the price of the enterprise's products becomes very high, thus losing price competitiveness in other markets; the second is to build factories in other countries, which is also called "greenfield investment". However, this method takes a long time, from choosing a factory site, building a factory building, purchasing and installing production equipment, recruiting and training managers and other employees, to arranging for the supply of raw materials and the sale of products, all of these take a considerable amount of time and energy. Since international markets change rapidly, by the time the construction of a new plant is completed, the market conditions on which the original plant was built have changed considerably. However, mergers and acquisitions can enable a company in one country to enter another country's market and expand its market share as quickly as possible.
Effective use of the target enterprise's various existing resources
The target enterprise in the host country generally have more mature and rich resources, specifically including the following: (cross-border mergers and acquisitions
1) mature and perfect sales network; (2) established patents, know-how, trademarks, goodwill, and other intangible assets; (3) stable raw material supply security system; (4) molded management system and established human resources; (5) mature customer relationship network. The existence of these resources can enable the merger and acquisition party to bypass the difficulties of entering the market of other countries, quickly put into production, improve and develop sales channels, expand market share, and reduce the pressure of competition. These are other cross-border investment methods are difficult to obtain.
Fully enjoying the financing convenience of OFDI
Enterprises from one country often need to finance their investments in other countries. Compared with "greenfield investment", M&A can be financed more easily. Specifically, after the completion of a cross-border M&A, the acquirer can obtain funds through the following ways: (1) using the target enterprise's real assets and future earnings as collateral, obtaining financing through the issuance of bonds; (2) using the target enterprise's real assets and future earnings as collateral, obtaining a loan from a financial institution; (3) the acquirer can avoid the pressure of cash payments by controlling the target enterprise through the exchange of shares with the acquired party, thus avoiding the pressure of cash payments. pressure of cash payment.
Assets or equity can be purchased cheaply
Cross-border mergers and acquisitions are often able to acquire assets or equity of enterprises in other countries at relatively low prices. There are three main ways in which this can happen. The first is when the target company undervalues one of its assets, but the acquirer has a realistic idea of what that asset is worth. In this way, the acquirer can acquire the assets of the other country's enterprise at a lower price; the second situation is that the acquirer takes advantage of the other party's difficulties and acquires a loss-making or depressed enterprise at a low price; the third situation is to take advantage of the target enterprise's stock plummet to acquire its stock.
Other advantages
Cross-border mergers and acquisitions can also effectively reduce the barriers to entry into new industries, significantly reduce the risks and costs of enterprise development, make full use of the experience curve effect, to obtain the competitive advantage of science and technology and so on.
Editorial features
Prevalence of strong alliances, mega multinational corporations
Since the 1990s, the scale of mergers and acquisitions in developed countries has been increasing, and the amount of mergers and acquisitions has reached record highs, giving birth to a number of mega multinational corporations. For example, in 1998, Daimler-Benz of Germany and Chrysler of the United States merged to form Daimler-Chrysler Automotive. The new company's market capitalization ranks second in the world automobile industry. Another example is that on January 15, 1999, the British Vodafone cell phone company announced its merger with the American Air Torch company to form Vodafone Air Torch, and the new company became the world's largest cell phone company.
Cross-border mergers and acquisitions are concentrated in developed countries such as North America and the European Union
According to the statistics on large cross-border mergers and acquisitions of more than 1 billion US dollars released by UNCTAD's World Investment Report 2002, the world's cross-border mergers and acquisitions activities are dominated by seven countries, namely the United Kingdom, France, the United States, Germany, Switzerland, the Netherlands and Canada. In particular, the bulk M&As of the top four countries amounted to more than US$200 billion, and their outflows*** amounted to US$1,261.2 billion, or about 73.8% of the total. Particularly prominent is the United Kingdom, whose bulk M&A volume accounts for about 36.2% of the total outflow. If we add the M&A volume from Western European countries, then in 2000, the M&A volume*** amounted to $826.7 billion, accounting for 95.4% of the total bulk M&A volume. Outflows from these countries and regions amounted to $838.1 billion, or 96.8% of total world outflows. Among them, the inflow of U.S. mergers and acquisitions transactions up to 255.4 billion U.S. dollars; Germany for 233.9 billion U.S. dollars, the United Kingdom for 140 billion U.S. dollars. 3, from the absorption of foreign investment in the industry composition, developed countries to the service industry, developing countries are concentrated in the manufacturing sector In 2001, the United States absorbed 1/3 of the foreign direct investment in the field of finance and insurance; the European Union absorbed foreign direct investment in public **** services, media, finance and other fields; Japanese multinational corporations in the United Kingdom, more than 50% of the investment in the financial and insurance sectors. Developing countries have the advantage of labor prompted transnational corporations to accelerate the transfer of production investment to the manufacturing industry in these areas.
Strategic mergers and acquisitions take the absolute advantage, and the number of hostile mergers and acquisitions decreases
Unlike the large number of hostile acquisitions in the 1980s, cross-border mergers and acquisitions since the 1990s have been made mainly by enterprises out of long-term development considerations, and mergers and acquisitions agreements have been reached after prudent choices, prolonged contacts, and patient negotiation between the parties concerned. As a result, the number of cases of hostile takeovers has significantly decreased. Since strategic M&A is a rational M&A behavior, although it brings stronger shocks to the industry, market and other aspects, it is a win-win transaction, and will not cause a lose-lose result as in the case of hostile takeover.
Horizontal mergers and acquisitions
The cross-border mergers and acquisitions since the 1990s have been mainly horizontal (horizontal) mergers and acquisitions. Horizontal M&A dominates in both traditional and emerging industries. Horizontal M&A in traditional industries mainly aims to reduce the excess production capacity and improve the ability of technological innovation in order to obtain the leading position in the industry. The industries involved are almost all over the traditional industries, including automobile, medicine, petroleum, chemical, food, beverage, tobacco, aerospace and other manufacturing industries and telecommunication, finance and energy services, among which the capital and technology-intensive cross-border mergers and acquisitions seminar
The type of industry is especially prominent. Horizontal mergers and acquisitions in emerging industries are designed to increase the size of the entity, improve scientific and technological research and development capabilities, and establish technological leadership. Cisco, for example, has become the world's largest company with a market capitalization exceeding that of Microsoft through mergers and acquisitions. Vertical acquisitions, although on the rise, have been less than 10 percent of the total, and are concentrated in the electronics and automotive industries, where they aim to reduce uncertainty and transaction costs associated with forward and backward linkages in the production chain, as well as to reap the benefits of economies of scope. Mixed acquisitions have declined significantly in importance, with the aim of diversifying risk and deepening economies of scope.
Methods of Financing Large Mergers and Acquisitions
Cross-border mergers and acquisitions through equity swaps are a product of the liberalization of trade in financial services, and the leveraged buyouts that were popular in the 1980s, characterized by the issuance of large quantities of junk bonds with the goal of maximizing short-term shareholder profits, have had serious negative consequences for long-term corporate development. These adverse consequences were fully exposed in the 1990s, and many enterprises went into recession or even bankruptcy due to their difficulties in bearing heavy debt burdens. As a result, in the 1990s, people are more willing to accept the stock swap as the transaction method of M&A. For the acquirer, stock swap can not only solve the problem of difficult to raise funds, but also avoid the adverse impact on the financial status of the enterprise due to excessive debt and interest burden. For the merged enterprise, the share exchange transaction can avoid the tax problems caused by the cash transaction, but also can share the benefits of the new enterprise to continue to grow, but also can enjoy the stock market to bring the stock price rise income. As a result, share-swap mergers and acquisitions became the trend of corporate mergers and acquisitions in the 1990s.
Intermediaries play a major role in cross-border M&A
In the 1990s, intermediaries have been instrumental in corporate M&A. In particular, the role of investment banks as professional advisors and intermediaries played an important supporting and promoting role. According to Thomson Securities Data Corporation, in 1999 Goldman Sachs, Morgan Stanley and Merrill Lynch were involved in advising on global mergers and acquisitions transactions worth more than one trillion dollars. These investment banks in order to maintain their dominant position in the industry, spared no effort, actively involved in major mergers and acquisitions, thus becoming a major driving force of the mergers and acquisitions wave of the 1990s.