Page 116 - DMGT545_INTERNATIONAL_BUSINESS

Unit 6: Modes of Entering International Business

6.5.2 Disadvantages of mergers and acquisitions notes

The disadvantages are:
1. Uncertainty about target’s value.
2. Difficulty in absorbing acquired assets.
3. Infeasible if local market for corporate control is underdeveloped.
4. This strategy adds no capacity to the industry.

5. Labour problems of the host country’s company are also transferred to the acquired
company.

6.5.3 mergers and acquisitions in india: the latest trends

Till recent past, the incidence of Indian entrepreneurs acquiring foreign enterprises was not so
common. The situation has undergone a sea change in the last couple of years. Acquisition of
foreign companies by the Indian businesses has been the latest trend in the Indian corporate
sector.
There are different factors that played their parts in facilitating the mergers and acquisitions
in India. Favourable government policies, buoyancy in economy, additional liquidity in the
corporate sector, and dynamic attitudes of the Indian entrepreneurs are the key factors behind
the changing trends of mergers and acquisitions in India.
The Indian IT and ITES sectors have already proved their potential in the global market. The
other Indian sectors are also following the same trend. The increased participation of the Indian
companies in the global corporate sector has further facilitated the merger and acquisition
activities in India.

self assessment

State whether the following statements are true or false:
8. International mergers and acquisitions are growing day-by-day.
9. An acquisition refers to the process whereby a company simply purchases another
company.

10. Strategic alliance does not provide help in technology transfer.
11. Joint venture does not improve access to financial resources.

6.6 Joint ventures

A joint venture entails establishing a firm that is jointly owned by two or more otherwise
independent firms.
Fuji-Xerox for example, was set up as a joint venture between Xerox and Fuji Photo. Establishing
a joint venture with a foreign firm has long been popular mode for entering a new market. The
most typical joint venture is a 50/50 venture, in which there are two parties, each of which holds
a 50 percent ownership stake and contributes a team of mangers to share operating control.

Notes A joint venture entails establishing a firm that is jointly owned by two or more
otherwise independent firms.

lovely Professional university 111