Question

Use the model of complex integration strategies to analyze how might the passage of the NAFTA agreement between the U.S. and Mexico might have resulted in more multinational production from Japan in both countries.

Cross Border Mergers and Acquisitions: Consider a world with two countries H and F. There are MH firms in H and MF firms in F. The distribution of productivity across firms is described by the function G(??). There is a fixed cost f of opening a new plant and trade cost is given by ??>1. Brands are viewed as of equal quality in consumers minds. Finally, let VF be the price of a “used” plant on the merger market in country F.

Answer 1

North American Free Trade Agreement has opened up new opportunities for small and mid-size businesses. Mexican consumers spend more each year on U.S. products than their counterparts in Japan , so the stakes for business owners are high. (Most of the studies of NAFTA concentrate on the effects of U.S. business with Mexico.

example :

Engine and Transmission Production, Trade, and Consumption .

The U.S. motor vehicle engine and parts industry makes up 13 percent of the U.S. motor vehicle parts manufacturing industry and is a microcosm of it. The regional motor vehicle parts supply chain is supported by imports from other vehicle manufacturing countries. The industry supplies an estimated 61 percent of engines and parts for U.S. . Another 24 percent comes from Canada and Mexico. Three countries—Japan, Germany, and South Korea—are home to manufacturers that produce vehicles in the United States.

Cross border Mergers and Acquisitions

A company in one country can be acquired by an entity from other countries. The local company can be private, public, or state-owned company. In the event of the merger or acquisition by foreign investors referred to as cross-border merger and acquisitions will result in the transfer of control and authority in operating the merged or acquired company.Assets and liabilities of the two companies from two different countries are combined into a new legal entity in terms of the merger, while in terms of acquisition, there is a transformation process of assets and liabilities of local company to foreign company and automatically, the local company will be affiliated.

Since the cross border M&As involving two countries, according to the applicable legal terminology, the state where the origin of the companies that make an acquisition (the acquiring company) in other countries refer to as the Home Country, while countries where the target company is situated refers to as the Host Country

Cross-border mergers and acquisitions have shown tremendous growth over time primarily due to a desire to circumvent tariffs and nontariff barriers arising from arms-length international trade and taxes; to obtain new options for financing; to access technology; and to distribute research and development costs over a broader base.Cross-border mergers and acquisitions deals between foreign companies and domestic firms in the target country. The trend of increasing cross border M&A has accelerated with the globalization of the world economy. Indeed, the 1990s were a “golden decade” for cross border M&A with a nearly 200 percent jump in the volume of such deals in the Asia Pacific region. This region was favored for cross border M&A as most countries in this region were opening up their economies and liberalizing their policies, which provided the much, needed boost to such deals. Of course, it is another matter that in recent years, Latin America and Africa are attracting more cross border M&A.