Lecture 6: Cross Border M&A Flashcards
What is a globally integrated market?
- foreigners have unrestricted access to capital markets
- locals with access to foreign capital markets
What is a segmented capital market?
- different bond and equity prices in different areas despite identical asset and risk
- when investors can’t move capital due to controls
What are the motivations for global expansion?
- Diversification
- Accelerating growth
- Economies of scale / scope
- Utilisation of lower material/labour cost
- Leveraging intangible assets
- Minimising tax liabilities (STARBUCKS)
- Avoiding entry barriers
- Avoid fluctuating exchange rates
- Following customers
What happened to Starbucks after they expanded to China?
- now in 62 countries
- growth in China in Q1 2013, 28%> than last year
- 6% same store growth worldwide
What were Seth et al (2002)’s diversification findings?
Firms with international diversification exhibit lower costs
Why did AB InBev and SAB Miller merge?
- To gain economies of scale and scope
- SAB Miller sold stake in Molson Coors joint venture due to monopolisation threats
What has recently happened in terms of raw material and labour cost considerations?
A move from China back to US
-GE, Whirlpool and Caterpillar “reshored”
What are the market entry strategies?
- greenfield (solo)
- M&A
- joint venture
- licensing
- exporting
What are some examples of greenfield investment?
- Aldi UK/US
- Hyundi in Czech Republic employed 3000 people
What are some examples of cross border M&A?
- Daimler Chrysler
- German and U.S. based
- both wanted to expand into each other’s markets
What are some alliances and joint ventures?
Skyscanner and Yahoo Japan
Jet airways strategic alliance with ethihad =later 24% in other to expand into India
What are the pros and cons of greenfield investments?
- have highest form of control
- provide full returns
- investment at risk
What are the pros and cons of cross border M&A?
- quick access to country
- expensive, complex and cultural issues can happen success
- provide high control over assets, not as high as greenfield, but more than international aliances
What are the pros and cons of international alliances?
- allows for cost/risk sharing
- access to other resources
- facilitate entry
- must share profits
- creates potential competitors
What are the barriers to takeovers in foreign countries?
- Statutory
- Regulatory
- Infrastructure
- Management
- Poor accounting
- Shareholder regulations
- Attitude
- Value system
