Editing Mergers and acquisitions (section)

==Cross-border==

=== Introduction ===
In a study conducted in 2000 by [[Lehman Brothers]], it was found that, on average, large M&A deals cause the domestic [[exchange rate|currency]] of the target corporation to appreciate by 1% relative to the acquirer's local currency. Until 2018, around 280,472 cross-border deals have been conducted, which cumulates to a total value of almost US$24,069 billion.<ref name="imaa"/>

The rise of [[globalization]] has exponentially increased the necessity for agencies such as the Mergers and Acquisitions International Clearing (MAIC), trust accounts and securities clearing services for Like-Kind Exchanges for cross-border M&A.{{citation needed|date=November 2012}} On a global basis, the value of cross-border mergers and acquisitions rose seven-fold during the 1990s.<ref>United Nations Conference on Trade and Development, 2000, World Investment Report 2000: Cross-border Mergers and Acquisitions and Development (Overview), New York and Geneva, p. 10.</ref> In 1997 alone, there were over 2,333 cross-border transactions, worth a total of approximately $298 billion.
The vast literature on empirical studies over value creation in cross-border M&A is not conclusive, but points to higher returns in cross-border M&As compared to domestic ones when the acquirer firm has the capability to exploit resources and knowledge of the target's firm and of handling challenges. In China, for example, securing regulatory approval can be complex due to an extensive group of various stakeholders at each level of government. In the United Kingdom, acquirers may face pension regulators with significant powers, in addition to an overall M&A environment that is generally more seller-friendly than the U.S. Nonetheless, the current surge in global cross-border M&A has been called the "New Era of Global Economic Discovery".<ref>Ayisi-Cromwell, M. "The New Era of Global Economic Discovery: Opportunities and Challenges". Thomson Reuters Emerging Markets Investment Forum. New York, NY. 19 Sep. 2012. Chairman's Opening Remarks.</ref>

In little more than a decade, M&A deals in China increased by a factor of 20, from 69 in 2000 to more than 1,300 in 2013.

In 2014, Europe registered its highest levels of M&A deal activity since the financial crisis. Driven by U.S. and Asian acquirers, inbound M&A, at $320.6 billion, reached record highs by both deal value and deal count since 2001.

Approximately 23 percent of the 416 M&A deals announced in the U.S. M&A market in 2014 involved non-U.S. acquirers.

For 2016, market uncertainties, including Brexit and the potential reform from a U.S. presidential election, contributed to cross-border M&A activity lagging roughly 20% behind 2015 activity.

In 2017, the controverse trend which started in 2015, decreasing total value but rising total number of cross border deals, kept going. Compared on a year on year basis (2016–2017), the total number of cross border deals decreased by −4.2%, while cumulated value increased by 0.6%.<ref name="imaa"/>

Even mergers of companies with headquarters in the same country can often be considered international in scale and require MAIC custodial services. For example, when Boeing acquired McDonnell Douglas, the two American companies had to integrate operations in dozens of countries around the world (1997). This is just as true for other apparently "single-country" mergers, such as the $29-billion merger of Swiss drug makers Sandoz and Ciba-Geigy (now Novartis).

=== In emerging countries ===

M&A practice in emerging countries differs from more mature economies, although transaction management and valuation tools (e.g. DCF, comparables) share a common basic methodology. In China, India or Brazil for example, differences affect the formation of asset price and on the structuring of deals. Profitability expectations (e.g. shorter time horizon, no terminal value due to low visibility) and risk represented by a discount rate must both be properly adjusted.<ref>Donald R. Lessart. "Incorporating Country risk in the valuation of offshore projects", MIT, Journal of Applied Corporate Finance, volume 9, number 3, 1996</ref> In a M&A perspective, differences between emerging and more mature economies include: i) a less developed system of property rights, ii) less reliable financial information, iii) cultural differences in negotiations, and iv) a higher degree of competition for the best targets.

* Property rights:<ref>Alchian, Armen, and Harold Demsetz. "The Property Rights Paradigm." Journal of Economic History 33, no. 1 (1973): 16–27</ref> the capacity to transfer property rights and legally enforce the protection of such rights after payment may be questionable. Property transfer through the Stock Purchase Agreement can be imperfect (e.g. no real warranties) and even reversible (e.g. one of the multiple administrative authorizations needed not granted after closing) leading to situations where costly remedial actions may be necessary. When the rule of law is not established, corruption can be a rampant problem.
* Information:<ref>Feng Chen, Ole-Kristian Hope, Qingyuan Li, Xin Wang. "The Property Rights Paradigm."Financial Reporting Quality and Investment Efficiency of Private Firms in Emerging Markets, working paper, University of Toronto, Wuhan University Chinese University of Hong Kong, July 6, 2010</ref> documentation delivered to a buyer may be scarce with a limited level of reliability. As an example, double sets of accounting are common practice and blur the capacity to form a correct judgment. Running valuation on such basis bears the risk to lead to erroneous conclusions. Therefore, building a reliable knowledge base on observable facts and on the result of focused due diligences, such as recurring profitability measured by EBITDA, is a good starting point.
* Negotiation:<ref>as an illustration, Laurence J. Brahm. "The art of the deal in China." Tuttle Publishing, April 2007, 160 pages, {{ISBN|0804839026}}</ref> "Yes" may not be synonym that the parties have reached an agreement. Getting immediately to the point may not be considered appropriate in some cultures and even considered rude. The negotiations may continue to the last minute, sometimes even after the deal has been officially closed, if the seller keeps some leverage, like a minority stake, in the divested entity. Therefore, establishing a strong local business network before starting acquisitions is usually a prerequisite to get to know trustable parties to deal with and have allies.
* Competition: the race to acquire the best companies in an emerging economy can generate a high degree of competition and inflate transaction prices, as a consequence of limited available targets. This may push for poor management decisions; before investment, time is always needed to build a reliable set of information on the [[competitive landscape]].

If not properly dealt with, these factors will likely have adverse consequences on return-on-investment (ROI) and create difficulties in day-to-day business operations. It is advisable that M&A tools designed for mature economies are not directly used in emerging markets without some adjustment. M&A teams need time to adapt and understand the key operating differences between their home environment and their new market.