Debates in the field of M & A Large number of studies focuses on the effect of internationalization on short- term value creation for acquirers, but yield mixed results.
While some conclude that international diversification in form of cross-border transactions yield positive returns for acquirers (Georges and Rendering 2004), others argue that these effects are characteristic to certain industries and countries (Demented 1995; Skimpy and Musketeer 2000). For the automotive supply industry, (Meant and Cherries 2006) do not find significant short-term return differences between national and crossbred transactions for acquirers while transcontinental deals have a negative influence.
The literature on long-run performance is less ambiguous and uniformly points to Eng-run negative returns to acquiring companies in cross-border deals due to the more challenging post-merger integration and imperfect information. As per (Meant and Cherries 2006), the automotive industry is not largely affected in short term by national or international transactions. Transcontinental deals might have a negative impact. In the long run, lack of integration and to sustain in a challenging environment becomes critical and usually leads to a negative return.
Apart from the long run and short run analysis, there are discussions also on the environment factors that affects M&A. Some are of the opinion that M&A is applicable only when the economy is booming whilst some who believe it does benefit in a bearish economy as well. Some analyst have concluded that it’s a favorable deal when the markets are bad as they believe that the acquirer would have bargaining power and that cannot be the case of a bullish economy.
Powerful and strong players would be readily available the company can plan a long term growth strategy and achieve successful results when the economy recovers. Contrary to which, there are few other analyst who have observed and believe hat in a slowed down and bullish market, entering in to an M might only worsen things and drop down the share price even further because the acquired company’s share price would be at its lowest. The risk involved would be high and it might require more liquidity than using it for such a transaction. 4. Key Research components The phenomenon of M&As has got considerable attention from the academic research community over the last 50 years. (King et al. , 2004). Given the plethora of definitions used by academic researchers to understand the corporate restructuring events, the research will introduce the developments, after which the main motivations for M&As will be put forward. The global automotive sector will be introduced, including a detailed analysis of the market dynamics, history of consolidation activities and the drive for such consolidations.
Conglomerate mergers are the most complex and most controversial of all types. The widespread interest in conglomerate mergers stems from three particular reasons: Firstly, differences in antitrust philosophy, predominance of conglomerate mergers in the current merger movement, and thirdly the current inadequacy of the theory of the multi market firm. Nearer J. C 1967). Horizontal Merger is a business integration occurring between companies in the same spectrum.
Various synergies are possible with horizontal mergers such as coordination of Joint operations, sharing complementary skills: manufacturing and distribution, improved interoperability, combining a patent with manufacturing and distribution, network configuration and fleet rationalization Joseph & Shapiro, 1990). Vertical mergers on the other hand occur between companies having buyer seller relationships. Nonworking Amateurish in his paper on vertical mergers and product fermentation proves that vertical integration enhances the degree of product differentiation of the integrated firm.