Cross Border M and a Deals

Cross-Border Mergers and Acquisitions
SYDNEY FINKELSTEIN

The globalization of business over the
past decade has spawned a search for competitive advantage that is worldwide in scale. Companies have followed their customers – who are going global themselves – as they respond to the pressures of obtaining scale in a rapidly consolidating global economy. In combination with other trends, such as increased deregulation, privatization, and corporate restructuring, globalization has spurred an unprecedented surge in cross-border merger and acquisition activity. According to Securities Data Corporation, there were more than 2000 announced cross-border acquisitions in 1996 worth over $252 billion. While this represents 54% more acquisitions than in 1991, the increase in dollar value has been even more remarkable, tripling during this time period. Clearly crossborder M&As have become a fundamental characteristic of the global business landscape. Even mergers of companies with headquarters in the same country – while usually not “counted” as cross-border – are very much of this type. After all, when Boeing acquires McDonnell Douglas, the two American companies

must integrate operations in dozens of countries around the world. This is just as true for other supposedly “singlecountry” mergers, such as the $27 billion dollar merger of Swiss drug makers Sandoz and Ciba-Geigy (now Novartis). Hence, understanding the problems and opportunities of cross-border mergers and acquisitions is an essential element in understanding most M&As, and indeed in understanding the nature of global strategy. In spite of the huge volume of activity in the cross-border M&A marketplace, an inescapable fact emerges when these deals are examined more closely – the majority of crossborder M&As are not successful. For example, economists David J. Ravenscraft and William F. Long found that most of the 89 acquisitions of American companies by foreign buyers between 1977 and 1990 they studied did...