The Rationale Behind Cross-border Mergers & Acquisitions

Abstract

Our paper aims to explore the rationale behind using cross-border mergers and acquisitions (M&As) as an entry mode to foreign markets. The result of our research showed that there is a gap between theories behind M&As as a market entry mode, and why company executives choose M&As. The reasons according to company executives for choosing M&As are that it is a quick way to enter a new, foreign market. It can also be a way to precede competitors, especially in rapidly globalizing markets as well as providing an already existing profit stream. The M&A process in practice seems to be lacking a step consisting of choosing entry mode, or at least this is not a step following identification of a market. In general, executives do consider cross-border M&As to be a successful means in their internationalization process. Additionally, there is a discrepancy in how M&As are evaluated. Executives more optimistic picture is attributable to the fact that they use M&As as a long-term means. Researchers are less positive about the success rate but uses short-term measurements for evaluation. The executives agreed with each other on both the success rate of M&As and the measurements used to evaluate them. We used a combination of multi-case study and qualitative interview in our research. We interviewed people from companies in different types of industries. All respondents were responsible for decision-making regarding mergers and acquisitions.