New Patterns of Industrial Globalisation
(CROSS-BORDER MERGERS AND ACQUISITIONS AND STRATEGIC ALLIANCES
Trang 2New Patterns
of Industrial Globalisation
CROSS-BORDER MERGERS AND
ACQUISITIONS AND STRATEGIC ALLIANCES
Trang 4New Paiterns of Industrial
Globalisation
Cross-border Mergers and Acquisitions
and Strategic Alliances
orcn (@
Trang 5ORGANISATION FOR ECONOMIC CO-OPERATION ‘AND DEVELOPMENT
Pursuant o Article af the Convention signed in Parison Lith December 1960, and which came into force on 30th September 195, the Oxganistion far Economlc Co-operation and Development {OECD} shall promote policies designed:
= to achieve the highest sustainable economic growth and employment and a rising standard of living in Memiber countries, while maintaining financial stability and thus to contibute to the development of the world economy:
~ to contibute to sound economic expansion In Member as well as non-member countries in the process of economic development and = to contribute tothe expansion of world trade accordance with intemational obligations on a multilateral, non-discriminatory basis in The original Member countries of the OECD are Austria, Belgium, Canada, Denmark, France Germany, Greece, Iceland, Ireland, italy, Luvembourg, the Netherland, Norway, Portugal, Spal Sweden, Switzerland, Turkey, the United Kingdom and the United States The following countries became Members subsequently through accession at the dates indicated hereoHfer japan {25th Apel 964, Finland (28h Fanuary 1969), Australia (7th June 19711, New Zealand (29th May 19731 Mexico [8th May 1994), the Czech Republic (ist December 1995}, Hungary (7th May 19%, Poland (2and November 1996), Korea 12th December 1996) and the Slovak Republic Lath December 2000) The Commission ofthe Eutopean Communities takes pat inthe work ofthe OECD lAdticle 13 ofthe OECD Convention
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Trang 6
FOREWORD
‘The globalisation of industry is reflected in an evolving mosaic of cross-border husiness activites ‘New combinations uf ltersational Mergers and acquisitions (M&A strategie allanees and greenfield tnvesiments are expanding the scope of global husiness and inereasing the Men maluational Enterprises i national economies Ths has pooloane! implications for the performance af rms ah tnvernment polities
‘This publication deaws on snalyses of globalisation and industil perfoamance undertaken under le auspiges of the OECD Conunitee for loa and Business Envieosment (CBE assesses eds twthe globalisation of sadustry ia the 1980 through 2000, with pastcular emphasis on hassness restraciuring thmgh cross-border MAA and strategie allances Gengrapical ends in major OED find non-OECD counties and regions ` and sectoral itends + inclaing in telecomavnications Automohiles, steel pharmaceuticals, airings and financial services - are resented The drivers of new ‘modes of industealplohalisaion and the implications for goverment polices are assessed A special section investigates the tale of small and medivavsized enterprises (SMES) The Statistical Annex bntains the latest data on œoseborler M&AY an intemational stategi alliances by region and sector
Trang 7TABLE OF CONTENTS,
sights
CChavier | Overview of Recent Trends, Introduction
Mergers and acquisitions Swategic alliances
[chavor2, Drivers of industeial Globalisation Introduction
Choice of globalisation mode Driving forces
Cchanor 3 Regional Trends,
(Overview: mergers and acquisitions Overview: strategic allances, United States,
Europe lapan
Chaser Sectoral Trends Overiew
Crose-sectoral MEAS and aliances Telecommunications Pharmaceuticals Automobiles Steel Finance ` of SMES Introduction
Mergers andl acquisitions Swategi alliances
Cchivier®, implications for industrial Performance and Policy Performance effects
Trang 8
st of noxes
1.1 Modes of industrial globalisation
12 Thể mega-meiger beneen VodalonealrTouch and Mannesmann 13 Grose border MAS and FI statistics
14 Equity and non-equity alliances
21, The merger of Daimler-Benz and Chiysier 22 Croseborder patenting
23 New wendsin Fiench MeAs A The Glaxo-WelleamerBiota Alance 42 General Motors alliance strategy 43, Twovletores for Star Alliance
6.1 Grose border Més s strategic allances 162 Korea's policy changes for FDI
List of Tables
LLL Top 20 cioss- border MEAS, 1998-2000 12 Bab online exchanges in selected sectors 31 award MEAS by egion and country 42 Ratioof inward MEAs to FDI inlaws 33, Outward MEAs, by region and county 4 Ratioof outvard MEAS to FDI outs
45 Regional distibution of alances partners, 1990-09, 3 USingard MEAS, by region and county
33 Top ten European target industries inthe United States 38 Top ten Asian target industries in the United States, 39 FDI into the United States, 1991-98
310, FOI Int0 the United States, 1991-98, 311, US outward MEAS by exion
4112 Shate of US crose border alliances by sector and region, 1990.99, 313 Europe inward Mér4s by vegion ant countey, 199098,
“LIK Top ten European target industries 315 Top ten US target industiesin Europe in Europe 3.10 European outward MBAS by regio
417 European cross-border alliances, by sector and regan, 1090.09, B18 Top cross-border MEAS in Japan, 1988-2000
Anon Tables
1.1, Cross-border and domestic MbAS
12 Grose border MéAswonh aver USD I billion 13 Grase-boider MEAS by sector It
1a, Gross-boider MoAsby sector 2) 15, Cross-border MeAsby type 1) 1 Clase-border Me As by type (21 15 Grostborder MEASby type 131 VÀ Grose-barder MeAsby type |S} 19 Cross-border MéASBY type 51 1.10 Strategic alliances by type
LLL Grose-botder sateaic alliances By sector 1.12 Strategie alliances by purpose
1.13 Cross-border strategic alliances by eype and purpose 4, nward cross bouder MEAs by region
Trang 9336 337 S8 339 340 4 42 “ 47 48 49 "
Insiard cross-border MEAs by region ‘Outward cross-border Mes by region ‘Outward closs-bordet Mé-As by reson Inward cross border MEAS in OECD countries Inward cross-border MEAs in OECD counties ‘Quiward cioss-borrer MéAsin OECD counties ‘Outward coss-border MEAS in OECD counties ‘Cross-border strategic alliances by region ‘trace alliances in OFCD counties, 1990-99 ‘oral strategic aliances in OECD counies
cross-border stategicallances in OECD countries “Top ten European target industries in the United States ‘Top ten Asian target industiesin the United States US cross-border alliances by tyne US erase borer alhances by reg
Us stategic alliances by purpose
‘Top ten pariner counties for U5 cross-border alliances US cross-border alliances by sector US cass bower alliances by sector
US strates alliances by sector and region, 1990-98 Us strategic RED alliances by sector and region, 199099
‘Share of strategic RED alliances in the United States by sector and region, 1986-00 Top ten European target industries in Europe:
‘Top ten American target industies in Europe European strategic alliances by ype European cross-border alliances by region European stiategic alliances By purpose
‘Top ten pariner countries in European cross border European cross-border alliances by sector European cross-howder alliances by sector
European coss-border alliances by sector an region, 1990-99 European RED cross-border alliances by sector and region 1990-99 [European ROD cross-border alliances by sector and region 1990 99 ‘op target industries in foreign acquisitions in Japan, 1998-2000 ‘ceoss-boider MEAS in span: couatties of acquiins fms, 1995.99 Japanese lrms' preferred countries for cross border MEAS, 1990-99 Japanese firms acquisition target industies in Asia, 199-99
Tapanese tims’ acquisition tagetindusttes inthe United States, 1996-09 Japanese firms’ acquisition target incstres inthe European Union, 1990-09 Top industies for coss-border MEAs and alliances, 1995-09 Top target industries fer rosssectoral MEAS, 1995-99
Telecorsmunications top cross-border MEAS 1990.Octaber 2000 Telecommunications top acquleer and acqulted ims counties in cross boree! MEAS 19004un 2000
Telecormmunications nationality of fms in cross-border aliances, 1995-09 Pharmaceuticals top coss-border MES, 19%-}une 2000 Pharmaceuticals top acquirer and acquired firm! counties in cross-border MEAS, 00 Jane 2000; Pharmaceuticals regional disvibution of cross-border alliances by objective, 1400-90, Pharmaceuticals: pharma-biotech alliances in the fst half of 2000,
PPrarmaceuticals nationality’ of fems in cross-border alliances, 1990-97, Automobiles: top coss-bosder MEAS, 1990-June 2000
Trang 10403 16, 47 4i i8 dạn da dại 45 426, an dam 3à 5ã
‘Automobiles: top acquirer and acqulied fms’ counties in crass border MEAS 1990 uae 2109 Autombiles regional dstbution of coss-border alfances by abjective, 1990.99
‘Automobiles: nationality of fms in cross-border alliances, 1990-00 US steel imports by country of origin, 1999 and 2000,
Steel trade position of selected counties, 195.99 Steck top cross-border MEAs, 1990-Octoter 200
Steel top acquirer and acquited fms’ countles in the cross-border MEAS, 1990-June 2000 Steel nationality of is in cross-border alliances, 1995-09
Aidines: top Coss botđer MEAS, 1990.june 2000
Airlines: top acquirer and acquire firms counties in crass border MéAS 1930 lune 2000 Airlines nationality of firms in cross-border alliances, 1995.99 Anes: bilateral alliances of Japan Ailines JAL} as of November 2000 Finance: top cross-border MEAs, 1990-October 2000,
‘Banking top acquire and acquired fms countresin cross-border MEAs 1995-October 2000 Insurance: top acquirer and acquired firms’ counties 1995-0ctober 2000, in cross-border MEAS
Banking: nationality of rms in cross-border alliances, 1995-99 Insurance: nationality of fms in cross-border alliances, 1995-99
‘Manutactuing cross-border MEAs involving SMES, acqulter and acquired Mums counties, 1980-09 Serices cross border Mes involving SMES, acquirer and acquired firms’ countries, 199-00 Manutacturing cross-border MGAs involving SMES by sector, 1090.99 Services: cross-border MBAs involving SMEs, by sector, 1990-99,
List of Figures Le l3 Me lá 1 18 lỡ hia ria "nà His, he his hi, lan lại a uM Đa a3, s4
‘Trend in cross-border MAS Large scale rss-border MEAS Grose border MicAs by sector Croseborder Mas by seeto Cross-border MEAs and FDI inflows Meas worldvide MEAS worldwide
Cross-border M&As by tansaction made Cross-border MEAS by transaction mode Share of related MéAsin cos-border MEAS Shae of rendly MéAs in cross-border MEAS Share of majority MEAS in cross-border MEAS, Shae of stock swaps in cross-border MEAS Cross-border and domestic svategc alliances Cross-border strategic allances by sector Cross-border statezicallances, by type Shae of cross-border alliances in total by ype Cross-border srategcallances, by purpose: SShate of cross-border alliances in total by purpose Shate of joint ventures in cross-border allances Finance: cross-border alliances with I fms by objective laterationa alliances and foreign production
Inward Meas by vegion Outward Mos, by region
Cross-border states alliances, by region, Stiategic alliances in OECD counties, 1990-09
Trang 11410 an a au 46, a7 418 420, sat 42 " " " 52 5a
‘Suuateicalllances in the United States US cose border allances, by region Us cross-border alliances, by type US cose-border alliances, by purpose US cross-border allances, by sector Strategic alliances in Europe European cross-border alliances, by regien
Japanese firms’ cioss-border alliances and inward MEAS 1988 2000 Cross-border MEAs Involving lapanese fs, 195-2000 Japanese firms’ preferred region in cross-border MEAs, 1990.99, Cross-border aliance deals of apanese firms, by region
Japan's technology exchange arrangements and joint ventures, by region alliance deals with Asin and North American fam, by sector, 198 lapanese alliances, by sector and region
‘Grose border M&As and alliances, 1990.300, International coss-sectral alliances by sector, 1990-2000
Telecommunications cross-border allances and MEAS, 1988-2000
‘Telecommunications cross-border alliances by objective, JanuarJune 2000
‘Telecommunicatons: egiona istibution of acquisition targets ane alance partner 199599 Pharmaceuticals cross-border alliances and MEAS 1985-2000 Pharmaceuticals reglona distribution of cross-border allances, by abjedive, 1990-99, Pharmaceuticals reghona distribution of cross-border alliance partners, 1990.99, Automobiles cose border alliances and Mes, 198% 2000,
[Automobiles reglona dstbutlo of cross-border alliances by objective, 1990.99 Automobiles regional distibution of ciss-border allance partners, 1990-99, Major alliances inthe automabile sector [Automobiles crast border alliances with firms; 19902000,
‘Steel: coss-boider alliances and MEAS, 1988-2000
‘Steel: regional distibution of cross-border aliance parners, 1995.99
Steel: preferred steel manufacturing lapanese steel makers cross-border alliances for non-steel businesses, 1990-2000 ste under cross-border alliances, 1990-99 Ailines cross-bouderallances and MEAs, 1988-2000
Aitines regional distribution of cross-border alllace partners, 1995-99, nance cose border alliances and MöAs, 198% 20 Finance: acquirers and alliance participants, by sector 199599
‘Cross-border MEAS targeting banks and insurance ns, 1990-2000 Regional distribution of cross-border alliance partners in banking and insurance, 1995-99 Bank an life insurance eross border alfances, 1990-2000,
'SMEs Cross border alliances and MEAs, 1088 2000 ross-barder MEAs involving SMES, 1988-2000
{cross border MEAs involving SMEs: share of acquired fms, by sie, 1995-99, ross border aliances ineolving SMEs; by firm size, 1988-2000 Ceose-borderaliances involving SMEs by sector
tos 105
Trang 12Industry is slobatsing more apy and rough diferent modes than previously
prompted by i arty of forces,
Undastrial sloblisation Is based ona new
set of Business dua related the rising importance of ntangiBle ase, HIGHLIGHTS:
New patterns of globalisation ae accelerating the internationalisation of Industey and reshaping indusirial stueture at global level, The international “activities of fms now extend far beyond traitional fos of trade and investmen Cross-border mergers and acquisitions (MEASI and strategic alliances are ‘common paths to imernationalising operations, research and markets Whereas Tams previously expanded geographically hiough foveign trade and investment, they now pursue innovative international stategles fr complete sestructuing; ‘of their operations And, more than before their exports and imports, mergers, alliances and other investments are interlinked, It is the intensity and ‘multiplicity of these intemational transactions that are creating a new workwide
Declining computing, communications and transport costs, coupled with regulatory reloum and ade and investment liberalisation, have prompted fins toadopt global strategies, Information and communications technologies ICTS! have greatly lowered transaction costs within and berween firms At the same time, governments have deregolated and privatised vast sections of industry land opened up thelr barders to oreign entities Changes in the structure of OECD Indust from manufacturing to services and fom lower to higher Value-added activites, have led to overcapacity In some sectors and intense competition ia ‘others, n this envizonment, rms need to restructure to enhance exif And they ae using competition and co-operation øs dual paths to growth, Firms are downsizing, locusing on their core competencies and shedding non-core ativities They ate becoming more specialised and adopting leaner and Mlarier business stwictures.No longer monoliths performing all tasks, they fre paring down and outsourcing functions such as research and development “computer systems support and market analysis, AL he same time, they seek ‘synergy with other enterprises, including at international level These leaner
lirms are buying and selling branches and activities and networking with Suppliers and competitors on a global scale In the new economic paradigm, downsiang andl upszing are employed simeltaneously as business stiaesies
Trang 13
rose order merger
sctity grew more tan fivefold The 1990
shite Intemational allances increased more tan ef,
vn increasngly trey virtual networks oa MEAS are ‘more frequent in eries than in ‘manafacturing _ of iferent sector related actors
access to brane names and specialised niche markets, The “lematesiallsation”of ‘much economic activity underies the new patterns of globalisation
Cross-border MéAs are now the largest component of foreign direet Investment (FD) Fims are buying and Selling assets and diverse operations and activities sather than investing in “greenfield plants” international MAS fre outpacing domestic unions, The value of iaceehational MEAS grew from USO 153 billion to almost USD I trillian im 2000, and there #8 an increasing tendency towards very large-scale deals,
Giowth in merger activity is paralleled by increases in cross-border stateaic alllanees, which now tend to outnumber domestic allances, But these interim Tinkages are different Irom those af the past in thei growing pace, sale and complexity The majority 57% of alliances are joint ventures, although non equity partnerships for co-operative research, praduction and marketing are rowing In Importance Approsimately 31% of itemational alliances inthe 1990s ‘were for production 27% fr marketing and 19% for vesearch,
Mote firms are forming glabal alliances through electronic networks, mainly the Internet They are combining operations for business to-consumer 182Cl and business-to-business (628) electronic commerce in targeted markets These virtual networks lead to tremendous efficiencies by reducing transaction and ‘search costs when locating suppliers and potential buyers Elecone alliances Involve a wide range of partners in a diversity of product and geographical markets Manolactoring frm in sectors ranging from electronics to steel are setting up industry-wide B28 exchanges, while service Firms in the retail aifinee and finance sectors are leaders in B2C e-commerce alliances Services, which account for 69-70% of GDP and employment In OECD counties, are playing a greater role in industrial globalisation Although many cross-border MEAs are stil occurring in manufacturing sectors such a Automobiles petcleum and pharmaceuricals,almast 6% of MEAS in 1999 100k place in service sectors including telecommunications and financial and business Services An even greater shate (almost 80%) of international stated allancee fn 2000 were in services rather than in manufacturing There ae also more cross sectoral deals They reflec the bluning boundary between manulacturing and services, such as links between computer companies and IT support services, and vehicle manufacturers and financial institutions that provide funds and Insurance lor car purchasers
Trang 14Although contredon large OECD firms, both mergers and alliances are diversifying _ographicall Benefiting Sail flrs as wel as lane cross-border MEAG im tiết rmatves from
Strategie alliances which are more fixie but may ‘ental higher Tnateadlon cots ‘Ths implies that fioms Jace various trade-off (obal industria restructuring has ‘conomeinnpacts In terme of efficiency {cross-border MBAs and allances have been dominated by fms fom afew
‘OECD countries The United States, the United Kingdom, Germany, France and the Netherlands accounted for 62% of intemational MAS in the 1990s But the {current wave of globalisation is extending land Korea, which have become more open to foreign investment And there has to other OECD countries, such a Japan been a surge of international mergers and alliances involving non-OECD ‘counties such as China Argentina and Bia!
Although globalisation is led by larger mukinational, there are widening ‘opportunities for smaller enterprises smal firms may have technology, know how oc creativity They may be more flexible cr have presence and brand names In certain market niches Though mergers or alliances with small fms, large “companies can economise on research, minimise the lead time for new products ‘andl serve emerging product markets Smal ms can get moth needed capital and broader distribution networks, Recent alliances between large pharmaceutical ‘companies and biotechnology ventures, for example, ae based an reciprocal advantages As new communication tools make it easier for small fins to hetwork, they are also reaching acioss borders to form joint ventures and alliances among themselves
‘cross-border MEAS are driven largely by the advantages of economies of scale and scope Firms can merge their decision-making structures and exploit -syacugstic efecs between thelr own tangible and intangible assets and those of {established fms They cap quickly establish a ctcal mass in paticular madkets ‘These unions can also serve to eliminate acival or potential competitors,
Strategic alliances are more flexible than MéAs as they wsually entail no ‘change i the ownership structure of participating fms Companies have a wide {choice of partners ia looser forms of co-operation for a variety of business chiles, But alliances can be dificult to realise an! involve a loss of contol and more risks As a result they may ental less investment than Tull merger but higher transaction costs
‘The choice between merger and alliance depends on short and long-tesm strategic objectives and related costs, While both reduce business overlaps among parters and promote economies of scale and scope, faster operational results can usually be realised through M&As While alliances have leer initia transaction costs, M&As may resuein higher pay-ofs inthe longer tem When ‘cross-border meigers of other investments are constrained by governments alliances may be a viable option st6As, alliances and greenfield investimeats may also be complementary strategies for restructuring and entering new markers,
Trang 15swell as competion Governments fave fro in ensuring positive spillovers va easing adjustment costs
“This may require sreater co-operation ‘cross countries,
‘There Is concern about the potential anti-competitive effects of these restwcturing trends, particularly in "network industries or when mergers and Silances bring together val firms The result may be higher prices for consumers bor reduced innovation, output product quality or related services However
fperation through one merger or alliance is usually paralleled by intense competition in other product of techrology aeas, at subsequent times oF though rival alliances And showter product and technology life-cycle 2s well as lawer prices resting rom these deals can reduce baners to entry far ther fins
‘To realise the benefits of global restructuring countries need first to be ‘move open to foreign investment and cross-border collaborations Because of overnment policies and coiporate culture, some counties have been largely closed until cently, Ongoing liberabsation a orelg investment cegimes means that a broader range of countries will prof, Other policies, however are needed to ensure beneficial spillovers These include science and technology policies hich promote Fnkages among actors innovation systems, relorms to corporate fovernance regimes to promote transparency and tewbilty, assistance to smaller firms In thei globalisation ellorts and outteach programmes that disseminate Information on foeign markets and partners
Global restructuring can lead to adfustment costs for firms, workers, communities and nations, Neither costs nor benelits fall evenly across feconamies or vegions In sectors such as steel and Banking, theve have been fo losses worldwide, In pat this is because the deals made do not always achieve their objectives ot because the cultural difculties of integrating companies are underestimated, Poors fusetioning actor and product markets can also dampen favourable impacts Governments can ensure ecient labour markets so a8 to facilitate the contraction expansion and alteration of business activities and related employment They can strengthen social salety nets to allow smooth Industial testuctuưing and minimise social distuptions They can provide {assistance for raining and vetaining, job search and mobility and promote the portability of pensions and benefits
Trang 16Chapter
OVERVIEW OF RECENT TRENDS Introduction
‘The globalisation af industy Is reflected in an evaling pattem of cross border business activities involving international investment, transnational production and related trade, technology transter and sourcing and complex cross-border networking for product development, production, sourcing and marketing Cross-border business activities have accelerated in the last decade, owing to rapid technological change, liberalisation of trade and capital movements and intense global compenition Recent modes of iadustial globalisation include greentield investment cross-border mesgers and acquisitions (MBs) and strategic alliances, including electronic alliances (Box I.) In other words,» firm may establish anew plant (greenfield mode) or acquire an existing local firm (MEA mode) in the host country ort may engage in co-operative alliances and partnerships with existing fms (strateaie alliance mode) New trends and combinations of crost-border MEAs, greenfield investment and Strategic allances re changing the pattems and scope of lobal business and increasing the presence and inluence of foreign companies in national economies
Although the patterns have changed over time and although industry and countey characteristics sf indstial globalisation has had twa distinctive features in recent years Fis, cross-border MEAS fre rapidly in the 19905 and played an important role i the globalisation and restactring of industy The share in overall GAs has als tended to increase i recent years An overwhelming share of frei direct investment {FDI}, the prime vehicle for seriously engaging in business across international borders, now goes for MEAS rather than gyeentildl investment As firms have refocused on thelr ariginal fr core businesses, shelving earlier divesiication stateges, they have expanded largely via MEAS $0 that amounts Invested in acquising equity have zIeen sharply in comparison to new productive investment igreenfield investment), This is probably linked to the Spectacular growth of international Financial markets over the last decade While many MCAS have long targeted small and medium-sized tenterptises ISMESI, the 1990s have Seen an explesion in the number and value of large-scale MEAS involving wellknown muinationals in addition, a wider range of sectors (particulary In services) and counties moze non-OECD countees! are represented Inthe cutest wave of industial globalisation
‘The second distinguishing leature of recent industrial globalisation is the rapid paallel increase of cross-border strategic alliances, which encompass a wide range of interfii links, including joint ‘ventures and co-operative research, production and marketing While stategic alllances are nota new phenomenon, thelr increasing pace scale and complesity diflerentiae them from those of the past Strategic aliances are now considered one of most powerful meckarisms for combining competition and co-operation and tor industal restructuring on a global basis Firms enter into alances fr various purposes, such as economising on she costs of production and researc, stiengthering market postion find accessing other fums intangible assets Alliances may link fims vertically or hosizontally nd an be elfecve tools fox outsourcing non-core business activities, streamlining and restructuring Allnces are being formed across a broad range of sectors, including chemicals and pharmaceuticals, computers tnd electronic equipment and financial and business services, in adiion, the range of partners has ‘widened; ims that long shunned joint ventures or close collaboration with other firms in thei core business ateas increasinaly enter into such co-operative arrangements To teach global scale
Trang 17
Box I Modes of industrial globalisation
reenfeld investment establishes now productive faces in the host county’ and ie traditional tents! mode for globalisation (Caves, Inez), Ts establish business in a particular foreign marke, teenie investment requles more tine than acquiting wxnting ms IMA mode However cam be ‘lesigned and implement to incorporate the paren cormpanynaloelsstegy hom he cutee nee by Slang the chalenging ination provers nelved in Mens Teslianally, feign investment plies TRaoar greenfield investments over Mns on the sesurption tha hey have mote immediate postive Mergers and acquisitions
Mono take pce when operating enterprises merge with merge) o aegie conto ol acqubitcn) betwen tems fiers national ern or ome countries A merger sete combination oF wo oPoke businesses ta achieve common objectives Onc the husines Is combined the merged company may cease to evst bith the acauling company assuming the aosats and liebies of he merged compar) Isiaeutory mover) ot the acquifed company may become a 100% subsidy of the parent compan taubeidary merger Aloo or more computes tay ata form an ently weM cOrapeny, i which fue all companies nuaned nthe merger cease to ext andthe shrehades became shartl ders of ‘rarets ofthe target company and combine wth x oun Burinesr MEA low me aul ety io Specie market hough he anquston of ptoction facies and ineangibe assets
Swategeallances
“3e technelogtes, skills, etc: According to Yoshino 11995), strategic alliances have the following three
‘characters + The io oF more fis that unite to pus «Set of agreed goal remain independent subsequent Tote formation ofthe aise
«The pane fms share the benelis of the alliance and can the pevomance of assigned l2 te ogy predic) 1
Stategi alliances encompass a wide range of interfir inkages including [ont ventures, Body equity vestments, equity stops jolt RED joint manulactring foi marketing longterm sourcing
Trang 18
nes chanel for globalisation such as electonic commerce are supplementing more traditional modes
bl rade and foreign investment Mergers and acquisitions Overall tends
‘The vast wave of cross-border MGAs inthe 1900s has a number of specific Features The mast jbvious is doubtless the scale and pace of coss-horder MEA activity The value of cross-bowder MEAS ‘worldwide increased more than fie-‘old dung the period 1990-99, om USD 158 billian i 1990 10 USD 792 billion in 1999 IFiguee 1.1) 1 increased particulary rapidly, by almost 50% between 1995 andl 1999, withthe biggest year-on-year rise (80%) in 1998 The pace of growth slowed a year in 1900, but these McAs were sill worth 30% more than in 1998 and more than twice as much asin 1997 The same tend was apparent, though o a less spectacular degiee, in the number of cross-border MEAS, which ncieased tivee-fold during the period 1990-08, komm 2 572 in 1990 10 7242 in 1999
Cros border M&As are also grawvingin size, with the average size increasing almost twofold during the period 1900-99, fom USD 59 milian ta USD 109 million The tendency toward bigger cross-border MEAS has stengthened in vecent years Since 1995, the value of closs-order MEAS Increased more than shld, hile the number of cross border MGAs only doubled éFigue 1.1), Thus, large-scale cross border M&As now account for most of the increase in the value of cross border M&As, For example transactions worth over USD | billion accounted for more than 50% of cross-border MGs worldwide between 1990 and 1999, even though they only represented about I's ofthe numberof cross-border MEAS (Figure 12 In particular these laige-scale cross-botdes MEAs accounted fr mote than 67% of the value of cross-border MEAS worldwide In 1999, Table 1.1 shows some typical laege-scale MEAS completed between 1995 and 200, The deal between Vodafone iTouch andl Mannesmann (Box | 2
Srreaun |
Trang 19Flque 12 Large-scale cross-border MAAS
Box 12 The mega:merger between Vodafoneni
fouch and Mannesmann,
In june 2090, Vodafonehirtouch PLC,» British clocommmuniatons company, acquired ts European obi telephone competitor Mannesmann AC jcermans) The merger deal held the spalght as 9 typical ase the coment lagerseae rosesbordet NEA Gens (eale‹ptc Firat, the transaction value was almost USD 203 billion, including USD 45 billion of net debt
VodafoneAirtouch and Mannesmann shareholders hold 30.5% and 49% of the shares of the combined
‘Second, the mega-deal was initiated by VodaloneAirToich PLC's hostile take-over bid af Uso 1 lien for Maanesmann AG This ital hostile take-over bid wae ejected by Manvesmmans Boaed of Dect and raised conceras in Germany However, during the coure ol merger negotiations Nodatonesiouch PLC revised ite Bid pice several tines fem USD Ide billion [13 shares per
1p 1999, Vodafone Group PLC acquired an American teleconimunications company, AirTouch
Communications, Inc, for USD 6043 billion and became VodafoneAitrouch PLC tn early 2000, Nannesmann AG alsa aequted a Sitish eleconmasistons company, Orange PLC fr USD 32 le Mannesmann Aci etges deal acema to have boon a defensive mave opsns ten bene eheraver
‘AG by hostile take-over {Orange PLC was sll ft France Telecom $4), Through series of rors border
Trang 20Tbe 11 Top 20erossbonder MEAs, 1998-2000
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‘sas valued at USD 203 billion, and that between British Petroleum and Amaco at USD 48 billion The value of ether eecentcoss-border megs-mergers is equally striking, exceeding USD 10 billion
Cross-horder MGAs are taking place across abroad range of sectors, high-technology and mature ‘manufacturing industries as well a services Automabiles, petoleum, chemicals and pharmaceuticals
Trang 21
by large-scale cross-border MEAS More and more cross-border MEAS are taking place in service Industries, which account for more than hall of cross-border MBAs in terms ofboth deal value and number ‘of deals Figures 13 and [-4)As the world economy becomes more service-based (services now account for 60.70% of GDP and employment in OECD countries), cross border MEAS ae playing a mare important role particularly in global restructuring ofthe services sector Unlike the cross-border MEAS ofthe 1985, ‘which often took place between diferent felds of business or industry, recent crose border MGAs often Involve the same or related industies Most ver large-scale MEAs were among fms in the same sector leg, telecommunicaions petroleum, automotive, pharmaceuticals, faance, electricity) from 1998 to 2000 [Table 1.11, This may reflect efforts by multinational enterprises (MNEs) to strengthen their global competitiveness in their core businesses or a desire to reduce competition in increasingly globalised markets Many INES choose to concentrate on thei care business, taking a long-term perspective on Profitability Asa result, they are willing to divest aon-core businesses to rise cash and invest in Sectors Uuhere they can position themselves as leader or challenger on ever large geographical markets,
Although cross-border MBAS are sil concentrated in afew countses tg the United States, the United Kingdom, Germans}, counties that traditionally viewed them vniavourably are becoming more ‘open to take-overs by foreign investors As inthe case ofthe MEA transaction between Renault and Nissan, for example, many lapanese enterprises are accepting greater foreign participation ta tackle problems of surplus industrial eapacity and debt overhangs In Korea, all remaining restrictions on ‘2cquisitions by foreign investors were repeated in 1998 as part of the structutal eforms inthe wake of the economic cisis MEA investments into Korea ate increasing rapidly owing to fling asset prices as vel as to changes in business practices and the creation ofan environment more favourable to foreign acquisitions Developing countries suchas Argentina and Brazil also accept cross-border MEAS as an ‘etfective way to globalise and restructure ther economies (UNCTAD, 2000),
‘The increasing trend towards cros-border MGA is more apparent when compared with worldwide | flows (Box 3) n 199, the value of total cross-border MEAS rose to 92% of total world FI inflows
Figue 1.3 Cross-border M&As, by sector
š | Te
: : | | |2 la Ì L
Trang 22Fique 4 Cross-border M&As, by sector Number of deals
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Box 12 Crosrberder.MGAs and FDI satietlcs
Trang 23Le
Foule 15 Cross-border M&As and FDL inflows
Ifisure 1.5, up rom 52% in 1994, Cleary, cross-border MEAs played a dominant cole i increasing Hows OFFI inthe 19905,
“The surge in cross-border MEAs In recent years selects the wave of domestic as wel as crass border MEA activity worldwide, The total value of M&As worldwide increased more than five-fold between 1990 and 1999, from USD 407 billion to USD 2 245 billion (Figure | 6) The total number of MEAs worldwide incteased almost three-Iold during the same period, from 8 585 in 1990 ta 24 113 Jn 1999 (Figure 1.7) Cross-border MEAs eepresented 30% in deal value and 28% in number of MEA ‘tansactons worldwide between 1999 and 149, n 199, their shave in worldwide MEAS cose t0 25% in ‘deal value and 30% in number of deals,
“Types of cross-border MEAS Movers or acquions
Figures | and 1.9 show trends indillerent modes of cross-border MGA transactions In teoms of dleal value, mergers including subsidiary mergers} accounted for almost 40% of cross-border MEA transactions woldvide during the petiod 1990-00, while acquisition of stock and assets accounted for 35% and 25% eespectively However, in texms of number of deals, acquisition frequent mode, accounting for more than hall ol cross-border MEAS worldwide over the period, hile af assets Is the most ‘acquisition of stock and mergers accounted lor 35% and 15%, respectively, This trend relects the fact that most large-scale Mes are caried out though stock ssaps
Related owned EAS
Trang 24Love of Race Trends Fue 15 MaAs worldwide ea vale
Fue 17 WaAs worldwide ‘Number of dale
‘yet recto
Trang 25
india lobalation, Cro
and Aenddlisrs se Sai
Fique 18, Cross-border M&As, by transaction mode
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Figue 19, Cross-border M&As, by tansacton mode Number of dais
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Trang 26Fue 1.10, Share of related M&AS In cross-border MEAS
horizontal MAS clude VodafoneAirTouchs acquisition of Mannesmans ia telecommunications, British Petroleum's acquisition of Amoco i the oil industry and Daimler-Benz acquisition of Chysler in the automobile industry horizontal MEA may give the merged company greater market power and is Subject to larly close eview by antitrust segulators Unrelated (or conglomerate! MGA ave all other types of transactions which occur between fiems in different lines of business without a specific relationship between them (en a food company acquiring a telecommunications company ora lnancil company)
ne af most distinctive tends in recent yeats isthe preponderance of related crass-border MEAS, which accounted for almost 75% of the value of erass-harder MéAs warldwide in 1908 and 1999 igue t.10),
Prien or hese MEAs
MEAS may be fendly of hostile, depending on the attitude a1 eecommendation ofthe target companys management or board of directors ithe board recammendls accepting the take-over offer it is considered to be fiendlyif the board officially rejects the offer, the take-over fs considered hostile The attiude ofthe hoard sometimes charges during negotiations Friendly and hostile McAsare diferent in terms ef the opportunity to access the target companys detailed financial data na fienly transaction, the acquiing company may obtain this information trom the target company However ina hostile wansaction, the acquiring company needs to resort to publicly available iaormation since the taget ‘company usually only provides the legally obligated minimum information, Examples of hostile cross border MEAs completed in recent years include Mannesmann (Germany), aequted by Vodafone iTouch (United Kingdom and estlacds (United States) acquired by Unilever (United Kingdon
Cross-border MEAs tend to be Iriendly: between 1990 and 1959, almost 95% of cross-border MBAS, in terms both of value and numberof deals, were friendly (Figure 111) in particular, the share of hostile cross border M&As ideal value) decreased rapidly in the 1990s, rom 22% in 1988 0 12 in 19,
firm may acquire either mote than 50% ofthe shares of the acquired fem majority MEAN ar up ta and including 0% Iminorty MGA) The former enables the acquiing company effectively to incorporate the acquited business into its own businesses and have full contiol over the acquired company
Trang 27
Le
Figue 111 Share of tlandly M&ASin cross-border Mas
Minority MEAS ae frequently used in strategic alliances and pantnerships wth other firms Figure 1.12 ‘shows that majority MEAS accounted for more than 85% of exoss-border MEAS, In terms of both value nd number of deals over the period 1999-98, The share of majority MEAS in cioss-horder MEAS has increased in recent years, and this may reflect a change in the pattern of strategie alliances, with firms making increased use of non-equity forms of strategic aliances,
Financing ad oes paynerl
‘cross-botdes MEAS ae financed in various ways, including cash payment in exchange for shaves acquired, the most liquid made of payment, financing through debt instcuments, cg by Issuance af
Figue 112 Share af majorly MAAS in cross-bordar MBAS
Trang 28Figure 1.13 Share of stock swaps In cross-horder M&As
bbonds on domestic or international markets loans fem financiat Institutions and inte-company loans tnd stock swaps, where equity i the acquiring fm is exchanged for equity n the target compan
‘The increasing size of cross-border MGA transactions may he an obstacle for financing in cash or through debt instruments In paticula, the sheer size of mege-mergers makes it almost impossible for acquis companies to finance the wansaction solely with cash or leverage In fact recent css-border 'MGAS tend to finance the deals by stock swaps For example, In 199, in terms of tansaction value, the share of MEAs financed by stock swaps represented 36% ofall cross-border MEA transactions and almost hal of large-scale cross-border MEAs Figure 1.13)
Strategic allances Overall tends
‘The number of new stategc alliances tbath domestic and international) increased more than 3 fold during the period 1989-99 from just aver 150 in 1980 fl which around 830 cross-border deals) t0 8.600 in 1999 (of which 4 520 cross-border deals| (Figure I-11) Even though formation of statesic alliances Huctuated between low of less than 4 000 1990 and a high of more than 9000 in 1993, the fhumber of stategic allances was sigaicanty higher in the 1990s than inthe 1980s There are also Indications that recent allances particularly jlnt ventures, at far larger in scale and value teams than eater partnerships
In each year ofthe 190s, intemational partnerships linking fis fom dliferent national economies represent the majority of alliances International strategic alliances accounted for 61° of al 149.000 alliances between 1990 and 1999 On average, there are about two International strategic alllances tor every domestic partnership, an indication that globalisation is 9 primary motivation for Steategc alliances, Cross-border alliances are being formed across a broad range of sectors, including chemicals and pharmaceuticals, computers and electronic equipment, and financial and business Services A greater number of partnerships are taking place In service industries than in manulactudng
(figure 1.15), 4
Trang 29
Figue 1.14 Cross-border and domestic strategie
Fue 1.15 Cross-border strategie alliances, by sector
Trang 30Cross-border suatenc allances often lava diva ems Furthermore, not any sval rms and fms
in ailerent counties, but also firms in dillerent sectors are being linked in strategic aliances Typical examples include the Du PontSony partnership to develop optical memory storage products the “Motarola’Tostiba union to develop manfacuring processes for microprocessors the General Motors! Hitachi partnership to develop electronic components for automobiles: and the Fujtsu'Siemens joint, venture for manulacture and sale of computer products
Those examples suggest that strategic alliances ae an instrument fr combining co-operation and ‘competition in corporate strategies Patten of co-operation and competition can be categorised in three ‘20ups: i co-operate then compete: when companies are not ready to compete In a particular area, they first co-operate with competitors to achieve shore-un objectives; once they build competence or achieve ‘a comman standard, the co-operating fins compete among themselves co-operate while competing Companies may contiaue to compete while they co-operate in some business ates (a ustated by GM'S partnership with Toyota, Such an alliance is generally aimed ot mutual learning to strengthen weak areas i) co-operate among themselves and compete with others: companies may formulate Co-operative agreements to compete with thie parties Culpan 1993)
“Types of strategic alllances
‘The various types of alliance rellect the full range af tlem interdependency and levels of Intertalsafion U.e vertical integration}, Alliances range from) relatively non-commital short-term project-based co-operation to more inclusive long-term equity-based co-operation (Narula and Hagedoorn, 1999) They may fall anywhere between complete interdependency and total Internatisation (cg wholly owned Subsidiaries} and Ire market transactions (eg completely independent fms engaged in arm'length transactions), At the same time, stategic alliances can be srouped into two broad categaties ~ equity and non-equity alliances ~ which represent different degrees of interdependency and internalisation (Bos 1-1), Both equity and non-equity forms of
Bos 14, Equity and non-equity alliances
say alanine fit ventures, minonly equity vestments el equity swaps A joint venture
‘is forstatese purposes, which creates a fetal Independent business erty and allocates ownership, ‘perational reponsolities and financial rske and rewards to each partner hile preserving each partners entity or autoncry The independent business entity can either be newly formed ot 8 Ecmnation of partners precenating unites divisors Eventhough the partners lakes nthe ne EENineee may sty all he partners te conatered owner 1 parental the new en They normally
Joint veatures generally alm at making the new company a self-standing envity with is own aims,
Nor-uuay oan ioctde a host of interim competative agreements such a8 RED callaboration cophdcton contort echcoay shang supply atangement, mathetingatecments avd explo oneartums The newest alliance sce a preliminary step toreting ont rare Ie te SScepen med broaden by noducing new proecs overt perod ol time hehe collaboration requires no Inajr ital commitment thas noliaiations i pebly the mest appeopniate fom of comperason ‘then the extent othe oladanship is impossible to foresee at the uset hen the lance not bos By a apeciie business or set of sists end when joint extemal commitment ats cela eyes ol pedis soph The nor squat colsborative arm maybe mnt appropiate fhe acy cancrned 3
Trang 31Ls
Floue 1.18 Cross-border strategic alliances, by type
lllances can be longtexm relationships which provide individual rms withthe means to broaden their Scope and share sks without expanding
Figure 1.16 shows trenls in types of cross-border strategic alliances About 97% of the strategic alliances observed over the period 1990-99 were joint ventures The non-joint venture alliances consisted of co-production and marketing agreements, joint research and development agreements ‘nd various other co-operative agreements including technology shoting, The share of joint ventures as ‘2 percentage of total alliances Mluctusted over the decade The slight decrease inthe share of fin ‘ventures in toal alliances since 1995 implies greater use of non-equity forme of strategie aliances Developed counties tend to use more non-equity alliances than developing counties, particulary for RED alliances However as Figuee I-17 shows, joint ventures tend to be more international than non: Joint ventures about 74% of joint ventures formed! during 1990-99 were International, compared to only 50% of nan-joint ventures
Purposes of strategeallances
Trang 32Figue 1.17 Share o cross-border alliances in total by type
Trang 33
Fue 112, Share of cross-border aliances in total, by purpose
In general, there isa close relationship between the objectives (purposes) of alliances and their type ot governance suctuze ISachwald, 2000), For example 23 co-operation comes closer to production 4nd distlbution,t tends to become more tighly organised In lat nthe 1990s, 76% of manutactusing lliances were joint ventures, while those for marketing and RED were only 42% and 25%, respectively iFigure 1.201, Firms also tend to choose a tighter co-operation structure involving equity investments ‘when alliances involve high isk and large assets to reach their abjestives Common assets as in the «ase of equity jaint ventures for production, may contribute to establishing long-term relationships ‘sions partners lances covering several functions, such 35 common distbution, Knowledge tansler ‘nd exchange of components may alsa involve minority equity holdings Tiss Hequently observed in the automobile industry leg, Ford-Marda or Renault-Nissan alliances)
Electronic alliances
Trang 34Figure 120, Share of joint ventures in cross-border alianet
Many 828 electronic marketplaces have been established as a joint venture by business suppliers andlor buyers and technology partners such as software developers For example, Covisin, an online 528 procurement network forthe automobile industry, was jointly established by five car manufactures ‘General Motors, Ford, DaimlerChiysler, Renault and Nissan) and two information technology (I rs ‘CommerceOne and Oracle}, B28 exchanges have the potential to generate remendouseffilencies by reducing transaction costs, rom placing an order to settlement, compared to rađlional communication means such as phone and fax, which may be mare time-consuming and less accurate By eeducing Search costs and fostering elficient bidding mechanisms #26 can also increase price ansparency buyers can find move suppliets at lower search costs, while sellers (suppliets) can gain greater and cheaper access to a broader range of patenval customers oint puchasing though B26 exchanges can tenable lage fins aswell as small take advantage of quantity discounts
Cn the other hand, 828 markets could facilitate price co-ordination among suppliers and exclude certain participants (companies) by denying them access and increase exclusivity (.e obliging buyers ‘and sellers fo deal exclusively with particular 828 markets) Since many online exchanges ate not yet ‘perational and since relatively sill volumes of goods and services ae being traded, I Is ot Yet possible t see to what exlent these B2B ventures may raise these concerns,
‘The internet also ollers direct and interactive interlace with customers For B2C e-commerce, services firms, including wholesales and tetalles, passenger altlines travel agencies and banks, ate among the leas in establishing online shops lar individual customers In the finance sector many omniercial banks and security brokerage firms have formed international alliances with internet service providers 1ISPs) for internet banking and trading services, which allow customers to check accounts, execute various transactions and! buy anel sell stacks over the Internet (Figure | 21) From Fanuary to October 2000, more than 20 such allances were formed with participation by internet service providers SPS), computer programming sewices and software companies although alliances between
Trang 35
Le
Tuble L220 ontine exchanges in selected sectors
financial institutions and camputerselated services and software developers have been common fora Jong time, most deals in the past involved computer and information system development for the formes in addition, financial fis are now seeking more technology partners for new online services
Trang 36Flgue 1.21 Finance: cross-border alliances with T firme, by objective
‘must goto the nearest dealer recommended by the manulacture and the rest of the purchase process is the traditional one ta August 2000, Ford announced its plans to establish FordDirect com, a joint venture between the company and afliated dealers, as a ay to reach customers via the Internet A ‘major rationale forthe venture isnot to promote direct B2C sales but to strengthen the link between Cstomers and leal Fard dealers which take on altersales service such as vehicle maintenance
Trang 37hapter2
DRIVERS OF INDUSTRIAL GLOBALISATION Introduction
‘he new patterns of industilal globalisation ~ the waves af coss-border mergers and acquisitions (06A and strategic alliances ~ are the economic consequence of globalisation and the restructoring strategies of multinational enterprises (MNEs), which face increasing global competition and technological changes n the 19905, MNEs have been aecelerating the diversification of the oreign ‘operations to take full advantage oftheir global reach by eedeploying their assets andl reorganizing their ‘petations on a global basis, through both internal restiucturing and extemal growth They have also bbeen seting up Intemational networks which inlve vasous types of pariners atound the world
‘Traditionally MNEs drive globalisation through forelgn dvece investment (FDI) to galn access t0 markets in foreign counties, The marketseeking motive of globalisation by MNES soften explained by the OL! (Ownership LecationInteralisation} paradigm which takes into account the fim’s competitive advantage, transaction costs and the characteristics ofthe host county iDunming 197; 1995), According to the OL! paradigm, a fim needs to have a fm-specilic competitive advantage (ownership advantagel ‘undertake FDI successfully, This competitive advantage generally arses rm fm-specific intangible assets such as production knowledge and skis, marketing capabilities and brand name or superior management capabilities, These intangible assets have two major characteristics they have th attributes ofa public good with large economies af scale and scope so that they ean be applied fepeatedly and simultaneously to multiple locations in a non-val manner, and they must have high transaction costs so that they cannot be traded efficiently on regular markets Thus, axa firm accumulates more intangible asers, thas steonger incentives fo exploit them though geographical ‘ixersifcation (la FDI oF other modes of iternalsation (Morck and Yeung, 19991 The OL! paradigm represents an internalisatian of markets aimed at extending the exploitation of a competitive advantage abroac
Firms also engage in globalisation to seek strategic assets resources) such as technology and management capabilities (Sachwald, 1998 In general a im needs external complementary resources find competencies ta fil the gap between is internal capabilities and its strateg which has tended t0 expand owing to rapid technological change and the globalisation process MNES ate therelore driven te seek complementary resources and technology Internationally through an Inteznal network of geographically dispersed alliiates, For example, lms that are Unable to develop technology in house wing to time oF resource constraints may choose MEAS of strategic alliances as a speedy way to fequie technologial and human resources [Miati and Sachwald, 1990), In this ease, globalisation is ‘motivated by a missing resource rather than by Some pre-existent ownership advantage as described by the OL! paradigm Kloreaver the process of globalisation aims at creating o einlorcing competitive advantages though an eflicien slobal production network This ellecs the rapid expansion of D1 by established MNES and of FDI from a wider ange of home counties in the 19905,
Recent studies of MNEs outline several other motivations for globalisation though cross-border MEAs and strategic alliances ley, Vasconcelos and Kish, 1998), MNEs sec to realise efciency gains by ‘restructuring their businesses on a global basis In parila, large-scale cross-border MEAS take place because large flams need to adapt toa changing global ensiconment by consolidating ther postion on
Trang 38
Paicipally on size advantages which have been ampltied by recent institutional, technological and ‘organisational changes, They can also serve to eliminate actual or potential competitors, Virtually all developed countries and many developing countries have competition laws which probibit anti= ‘competitive mergers horizontal mergers, particularly in highly concentrated markets are generally subject to fats close scrutiny by competition authorities to very efficiency effect, although this may not always be completely effective IOECD, 1990) To reduce tsk rams may acquite Companies in other ‘economies on the hasis tha the covariance of Indusiysetuens likely to be sialleracoss economies than in one economy Fins also often choose strategic allances i order ta shane vsks al costs and 10 speed up their entry into new markets
The pattems of globalisation of MNES primarily depend! on their motivation for globalisation and their competitive advantages as well as the avalable options (MEA, greeafield operation, strategie alliance) In order to achieve thele strategic oblecives, MNEs choose speltic globalisation modes in 2 Competing or complementary way industyy and county characteristics and the alobal economic ‘envionment also affect the process of globalisation
CCholee of globalisation mode MBAs vs greenfield incestment
.AS an entey mode, speed is the biggest advantage of Mé.As over gieenfeld investment or other ‘entty modes M&AS enable the acquiring lim to establish an immediate critical mass of production facilities and intangible assets ina particular industy, This is important in the automobile and telecommunications industries and in insurance and banking services for example, which need vast, investments in production facilities or distibution and service networks to ensure a minimum level of scale econamies in fact, its almost impossible to enter these Industies quickly through gieentield Investment, This panly explains the surge of recent large-scale cross-botder Mas In these industies, However, owing co cultural and organisational barter, cross-border MBAS may present more sks than ‘reeneld investments in the post merger restructuring process, To establish business in a particular market greenield investments take longer than MEAS, but can be designed and implemented so as to incorporate the parent company's strategy rom the beginning Furthermore, in some cases, cross border MöAs may not be allowed owing to regulatory constiainis Thus, MEAS and greentield Investment are generally wealistic allematives, but the choice can be zesucted in some cases,
Empirical research identifies several fi-level factors that influence the choice of entry modes for DI, Fiek t bạc been abserved that MGAs are more desirable when a firm has greater organisational ‘and managerial skills, while greenfield operations ate prelerable when the fim has areater Technological sil (Anclesssom al Svensson, 1994) Organisational and managerial skills ae associated with the ability 40 absorb and wulise existing knowledge, while technological skills Kaked to technology development and the ability to innovate in relation to investment in research and development (REDI Since a firm's international experience is generally related to its organisational land manageval skills, ims with more iaterational experience tend to favour take-over Previous presence ina host county also inceases the atvaciveness of take-overs, For a fim with established alates inthe host country these are likely fa be areates benefits from fake-overs than from greenfield ‘operations a new investments in plant and equipment may increase capacity and competition inthe host country market, thereby leading to lower prices and profits and hurting the frm existing afates ‘This implies that as multinational operations increase, use of take-overs may rise
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European countries with relatively low competitiveness In these sectors, while MEAS take place in
counivies that are more competitive ra greenlicld investment in semiconductors and tanspor in the United Kingdom and MeAsin chemicals in Germany and the Netherlands
MEAS os statealeallances
Closs-border MEAS and strategic alliances shate much common ground Both are diiven by 2 este ta reduce the lansactian and co-ordinating costs of axm'lengte market wansactions They also im fa shore risks and investment or nex business (products) and to ensure synergy effects by making the most of partners’ complementary tangible leg production facities and distibution channelst and imangible (3 market krowledge and managerial skills) assets However, strategic aliances difer from MEAs in several respects They may’ entail no change inthe ownership structure of the participating firms, They give firms greater Mleaiility for tesponding to changing market conditions and the unexpected emergence of new competing products, In particular, non-equity alliances enable participating ims to change ther strategies quickly by dissolving or leaving 2 joint project which no longer provides substantial benelit Alliances Compared to MEAS, in which an acquiring firm generally takes on all assets ofthe acquired company, including falling business operations, alliances allo frms to calaborate any in those areas considered are also tlexible in terms of areas af co-operation te be of value to both, Strategic alllances can thus ceate a "win-sin” situation forthe partners with benefits forall patiipants IParkhe, 1998), Same alliances can allow fami to achieve the berelits of a merger at less cost, such as the firm's cestructaring I they are carefully designed and implemented orange and Roos, 1992),
However, compared to MBAS, stategic allances also have disadvantages, They may entall more problem [eiskst for contol and implementation, while MBAs can provide the merged finn with a more Integrated decision-making stuctore, Statege alfances can be dificil to establish and involve cera Fisks, as their implementation is generally beyond the control of a single party Parnerships make decision-making and control processes more cumbersome, Shared ownership arrangements can also ‘eate problems resulting rom the oles assumed by the partners in the venture, since paties may not be clear about their respective roles A partner may establish co-operative linkages with competing (ương and thus hamper the alliance, As fis enter into mare alliances, it may be more dificult fr them ta mainain a balance among their alliances Some partners may gain more than others, andl unequal benefits can damage a parnership when expectations dilfer and stakes are high-Large parners tend to dominate smaller ones and can shape relationships by changing strategies unexpectedly AS a resulta Suategicalliance may ental higher transaction costs than a ull merger
In general, firms choose hetween M&As and alliances in an attempt to strike an appropriate balance berween short and long-teim strategic objectives and the financial and time costs they bear \While both alliances and MEAs are expected to provide synevay elles inthe long run, by reducing business overlaps and cutting costs among partners, for example, MEAS may’ be a better stategy for achieving immediate results by creating a critical mass ina particular marke, adding nes lines of business and providing ailing firms with financial hoost, The results (eg new products) of alliances tend to take longer several years in some cases, and their scope may he more fmited RGD alances may require some ime to invent new technologies for example and many joint development activities {end tobe launched! 95a one-shot collaboration in a spedtic eld
Trang 40
specific management problems slated to corporate cultures, asa result of which stategl allances ray However, MEAS ate nor aluaysa viable altemative to strategie alliances, For example where cross border Maas are not allowed, owing to constraints on competition I eligopolistic industries) or foreign onnership regulations leg telecommuications and aittne industries), cross-border strategic alliances are the only way fr tims to respond to increasing globalisation and technological change The popularity o alliances inthe ailine industry is mainly due to lore'gn ownership restrictions on rational “aires In ealier periods, regulations and pieferences of host oveinments were one of the major reasons why MNES resorted fo jaint ventuies, in particular in regulated industiles ancl developing, counties (Sachwald, 1998) Theve nay also be complementary effects between sirategic lances and ‘ther types of strategic options such as MEAS or greenfield investment Acording ta the MERIT-CATI database on strategie alfances forthe period 1980-94, strategcalinces are not used as an alternative to subsidiaries or mergers but can complement them as a means of access to markets and other resouices iNarula and Hagedoorn, 1990), Strategic alliances may also develop into MEAs involving Partner fms ata later polne, Finally, both alliances and MEAs tend to succeed when partners have complementary tangible and intangible assets,
Driving forces
ew trends and a combination of cross-border MEAS and strategic alliances have been changing the pattern and scope of elobal business They have also been the mainspring of growth and ofthe current wave of industrial and financial restructuring at global level Even though the surge i cross border MEAs and strategic alliances relects liems’ global business strategies recent economic, Institutional, technological rd organisational changes have also played a tole MBAS are not a new Phenomenon, although thelr motivation and characteristics may have changed For example, they have ‘occured in waves throughout the past centr, with increased activity when stack market pries were high (Mueller 1989) Eeanamic recessions or booms can alse affect the level of MEA and alliance sctvty and thei focus
Technological change encourages both cross-border MGA and strategic alliances For example, the new information and communication technologies \ICTs) such asthe intevnet, electronic mail and ‘electronic data interchange IED!) make cioss-border business expansion ft easier and more practical than before: These ICTs also help to create new businesses and markets and have changed market conditions rapidly Technical competence and market know-how lexibility and ability to innovate have Increasingly become strategic corporate assets, while the speed of technological developments shows no sign of slaving At the same time, with the soaring costs of R&D and the uncertainties of technological change, companies ace foiCed to 100k for partners from whom such intangible assets can be obtained and absorbed fac, innovation and the development of leading-edge technologies chive most alliances in high-technology sectors,
Liberalisation and pvadsatlon pollles and regulatory reform influence cross-border unions by ‘opening up opporturities and increasing the avalbility of targets for MGAs and alliance partners, With fareater market deregulation and liberalisation, competition's increasing at imermational level and ‘Simulating cross border consolidation and new and diferent aliances between enterprises Recent changes in corporate governance also playa role, as they have tended to enhance fm transparency, responsiveness and flexibility, making i easier for them to engage in MEAs and strategic alliances In particular the current wave of MEA activities is stimulated by the emeraing Influence and role of, Institutional investors with respect to the creation of shareholder value,
Industry characteristics, such as growth prospects marker stucture and coospetiton have a strong influence on cross-border M&As and alliances, Slow growth, excess capacity and increased global ‘competition typically drive industrial restructuring, pushing companies to seek partners in order to reduce costly overlaps and exploit synergies Thus, recent large-scale unions have tended to be concentiated in major sectors such as automobiles, pharmaceuticals, finance and telecommunications, [2% which ate experiencing intensified global competition and market pressures (Box 2.1), For example,