Firm Diversification

By and large, a firm enters into mergers and acquisitions with another company which operates in a similar/connected line of business instead of diversifying it and entering into a business in which the firm lacks enough experience. A company that enters into a merger with a diversified firm has the opportunity of exploiting a range of advantages that are not accessible to undiversified firms.

Internationalization is one of the most significant approaches that companies adopt in today’s marketplace purposely to extend their operations in foreign nations. Cross-border acquisitions refer to acquisitions that are done by parent companies with their head office in one country and mergers in different nations (Sherman 2011, pp.201-12). In most cases, domestic acquisitions are easier to carry out as a result of both companies being familiar with the laws, procedures, and other such aspects. However, international mergers are quite complex due to the various intricacies.

The main reason why companies opt for cross-border mergers and acquisitions are simply because it requires a lot of time and money to establish operations in a foreign nation. Additionally, a lot of time and money is saved in establishing its own infrastructure and supply chain. Research indicates that cross border acquisitions have resulted in positive gains for shareholders of companies involved.