Transnational mergers and acquisitions: how to beat the odds of disaster

Abstract

Purpose

The aim of this paper is to discuss the trend towards cross‐border mergers and acquisitions (M&A) and review best practices for successful cross‐border M&A transactions (and how they differ from executing national deals).

Design/methodology/approach

The objectives are achieved through a review of four best practices for successful planning, implementation and execution of cross‐border deals. Also, a March 2006 Accenture/Economist Intelligence Unit survey is used which highlights trends towards cross‐border deals and common pitfalls in the successful execution of deals – in particular the difficulties in addressing cultural issues and local due diligence.

Findings

The paper finds that executives believe in their M&A strategy but doubt their organizational ability to successfully implement and execute and to realize financial gains and cross‐border deals offer a different mix of opportunities and risks, which need to be understood and managed if the deals are to be successful. The key to success lies in understanding exactly what makes cross‐border deal making different, and in developing the skills needed to create value.

Practical implications

There are four key drivers of success in cross‐border M&A: start with a clear and compelling strategy – the most successful cross‐border acquirers begin with a clear view of both the role that cross‐border acquisitions will play in their strategy and the type of companies best equipped to fill that role; do your homework – the greatest risks in cross‐border transactions arise from the failure to understand the culture, regulatory structure or competitive environment – and sometimes all three considerations – in the target market; value your new people – regardless of the rationale for the acquisition, a key asset – many would argue the most important one – in a cross‐border acquisition is people; and execution, execution, execution – successful execution begins early – in some cases, long before the deal is done.

Originality/value

A recent survey (Accenture/Economist Intelligence Unit, March 2006) shows for the first time that among global M&A deals, cross‐border transactions now exceed domestic transactions – and this trend is likely to continue. Yet for many c‐level executives, the prospect of acquiring or merging with a company in an unfamiliar market is daunting – and cross‐border M&A is considered more difficult than executing on domestic deals. This paper is intended to give c‐level executives practical, hands‐on advice for conducting cross‐border M&A as well as publicizing survey results specifically on the cross‐border M&A trend.

Citation

Firstbrook, C. (2007), "Transnational mergers and acquisitions: how to beat the odds of disaster", Journal of Business Strategy, Vol. 28 No. 1, pp. 53-56. https://doi.org/10.1108/02756660710723215