Impact of cross-country M&A on operating profit margin

The aim of this article is to check the impact of cross-country mergers and acquisitions (M&A) on the operating profit margin. The previous article explained the methodology followed in order to achieve the objectives of this research.

  1. Compare the pre and post-merger performance of selected cross-country mergers and acquisitions (M&A) deals.
  2. Examine the impact of the announcement of mergers and acquisitions (M&A) on the excess returns on the shares.

To achieve these objectives, quantitative analysis was carried in a series of articles. The present article deals with the analysis of the first objective.

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Impact of inter-industry mergers and acquisitions on the profitability

Inter-industry mergers and acquisitions have become common in today’s business world due to the benefits associated with them. The effect of mergers and acquisitions manifests in many ways determining a firm’s financial performance.

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Impact of mergers and acquisitions on shareholder’s wealth

The previous article focused upon the need for mergers and acquisitions, i.e. the need for value creation. This value creation arises in the form of improved business operations and financial performance. The financial performance is linked to shareholder value which in turn affects the capital structure of the businesses. Generating more wealth for the shareholders can help to build a strong capital structure which is essential for long term growth of businesses (Haleblian, et al, 2009). Therefore, it is important to examine the impact of mergers and acquisitions on the wealth of the shareholders.

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Synergies in mergers and acquisitions

Synergies are a form of value addition created in merger and acquisition (M&A) activities. The value addition is a representation of the finances in the form of revenues and costs that these merged businesses can achieve. The value addition is not possible when businesses operate as separate entities. Formation of synergies can help businesses attain higher output, better placement of staff and good facilities (Ogada, Njuguna and Achoki, 2016). However, the past decade has witnessed a transformation in the formation of synergies. Traditionally, organizations merged to reduce costs or to expand their geographical presence. However, in the modern value creation process, businesses merge to expand their business capabilities into new domains (Loukianova, Nikulin and Vedernikov, 2017).

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Determinants of cross-country mergers and acquisitions

The 21st-century corporate world has witnessed the phase of globalization. It has led to technological advancement and the removal of trade barriers across countries. This is important as the competitive advantages of different organizations differ in terms of availability of raw material, investment, technology and so on. Therefore, in order to ensure long term growth potential, organizations have started forming cross country mergers and acquisitions (M&A). In contrast to the domestic mergers, cross country mergers help businesses in realizing the scope of new market opportunities. This is evident from the rise in the volume of cross border M&A.

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Human resource issues in mergers & acquisitions (M&A)

Globalization and stiff competition in the marketplace has made business firms vulnerable to failure. There is greater integration of world economies and as a response the firms also need an integrated effort to perform in the competition. Thus, increasing numbers of firms are getting into merger and acquisition. Read more »

Why business engages in mergers & acquisitions (M&A)?

Mergers and acquisitions have been ruling the business pages of newspapers since the recent past. The firms are increasingly signing M&A deals but earlier such deals were signed without much analysis with huge expecmergertations of mutual success, but now the cons are also considered before getting into this. Read more »

Impact of Arcelor & Mittal merger

The globe’s largest steel company, ArcelorMittal (previously known as Mittal Steel) finally emerged victorious in its bid to acquire Arcelor in the year 2006. Read more »

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