Question

What are the conditions that affect the success or lack of success in cross border acquisitions by multinational corporations? Give an example.

Answer 1

A Cross Border Acquisition is an Acquisition wherein one company in Country 1 acquired another Company in Country2.

An example of such Cross Border acquisition is Acquisition of Land Rover/ Range Rover/Jaguar by Tata Motors.

Tata Motors is an India Based Automobile company which acquired Land Rover/Range Rover/ Jaguar which is a company based in the UK primarily.

There are a number of reasons with respect to Success and Lack of Success of such a transaction.

Success Reasons:

1- Access to diverse working culture

2- Greater Availability of Resources. Different types of resources can be made available like Labour, Capital, Manufacturing Units, Favourable Country specific laws etc.

3- Synergy between the companies especially if acquired in the same business line. This helps in cutting costs and increasing efficiency of performance.

4- Better Human Resources which allows for Cross Border techniques and development between people affecting efficiency

5- Better Access to Different Market. Having a Company in India and UK allows both the company to be able to access diverse markets which allows them to be able to sell their products in markets which they did not even think about.

Lack of Success Reasons:

1- It may be possible that even though the companies are manufacturing the same product they have a very different way of working which might not sync with the purchasing company leading to Inter company conflicts.

2- Top management might not get aligned and there may be clash of ego's

3- Country specific environment and laws may hamper the business between the companies. A Great example of such a situation is the chaos of Brexit which has created un certanity due to which the operations of the company has been hampered.

4- If the company is not able to cope with both the companies their competitors may end up taking the market share owned by them.