Question

In recent years, the number of cross-border mergers and acquisitions has increased. What are the risks associated with the popularity of this method for entering foreign markets? Provide real-life examples of such risks and how do you think these risks can be reduced?

Answer 1

Financial disclosure and Information: FInancial disclosure norms vary by country and if you are doing a deal in a country with not so stringent norms for disclosure, then you might have to work with limited financial information while evaluating an M&A deal.

Legal issues pertaining to the current law of the land  may be a make or break situation for an M&A deal. It may become hard to anticipate any legal changes or issues a firm may encounter in the future in another country.

Tax issues are another thing that needs to be kept in mind as they may differ significantly between countries. Tax complications may wipe out the entier synergies initially estimated for an M&A deal

Ploltical Stability paramounts everything else when it comes to delaing with cross border M&A especially in devloping countries. A change in establishment may result in various fiscal and moentary policy changes which may impact a purticular sector or economy unfavourably

Another major issue which is usually not given much heed is the cultural diffrences between two countries and may become a major hurdle in proper integration of the two firms