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Due Diligence for Global Deal Making

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Due Diligence for Global Deal Making

The Definitive Guide to Cross-Border Mergers and Acquisitions, Joint Ventures, Financing, and Strategic Alliances

Bloomberg Press,

15 min read
10 take-aways
Text available

What's inside?

Imagine marrying a foreigner and blending your cultures, morés and money. A cross-border M&A is like that, only harder.

Editorial Rating

9

Qualities

  • Innovative
  • Applicable

Recommendation

As with marriage, the success rate for global deal-making should give the wise investor pause. Most such mergers and acquisitions do not increase shareholder value. Even with the fallout from the burst bubble still landing all over the place, the juggernaut of globalization is such that international deals still manage to engender a lot of passion; it seems the grass is always greener on the other side of the border. Business leaders know that sometimes the riskiest move is the one they decide not to make, since a good strategic acquisition can ensure your company’s survival. For these reasons, interest in cross-border transactions will probably remain strong, as industries consolidate and as global economic barriers collapse. However, deals that involve foreign accounting and legal practices can be absolutely perilous without expert professional guidance. This clearly written, thorough compilation can help you avoid making a bad decision and improve your odds of success. getAbstract.com strongly recommends it to anyone involved in (or considering getting involved in) global deal making.

Summary

Do Your Diligence - And Do It Right

If you’re considering a cross-border acquisition, begin by understanding that your chances of a happy outcome aren’t so good. That doesn’t mean you shouldn’t proceed - certainly many M&A deals work famously - but go into the process with your eyes wide open. A 1999 KMPG study of the top 700 cross-border deals between 1996 and 1998 revealed that most - more than 53% - diminished the buyer’s shareholder value. In 1995, Business Week examined 150 merger and acquisition transactions valued at more than half a billion dollars. Only 17% resulted in substantial shareholder returns to the investors.

These dreary statistics aside, it is an interesting trend that M&A is no longer the sole domain of domestic corporate giants. Mergerstat reports that between 1992 and 2000, M&A transactions between U.S. buyers and non-U.S. targets rose from 403 to 1,400 - a 247% jump. The total dollar value rose from $14.05 billion to $136.75 billion - an 872% hike. M&A activity involving non-U.S. buyers and U.S. targets also soared, from 167 to 1,248 - a 647% rise - with the deals’ value growing from $9.3 billion to $299.2 billion - a 2,217% ...

About the Author

Arthur H. Rosenbloom is a member of the arbitrator’s panel for the New York Stock Exchange and the American Arbitration Association, as well as an adjunct professor of finance at New York University’s Stern Graduate School of Business and managing director of CFC Capital Corp. He has been widely published in business periodicals.

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