A comparison on the execution of variables that determine successful mergers and acquisition activity in emerging markets : differences between emerging market multinational and developed market multinational corporations

Abstract

The internationalization process of firms has essentially been in two contexts, one focusing on those from the developed, and the other on those from the developing economies (Buckley et al.2008). According to (Panond, 2007), internationalization of Emerging Market Multinational Corporations (EMMNCs) has appeared in two waves, the first wave, which emerged in the late 1970s and early 1980s viewed the competitive advantages of EMMNCs as being derived from their ability in reducing costs through scale economies, often substituting machinery with human labour and replacing imported inputs with cheaper local ones, or improving performance through knowledge of operating in less developed markets.The objective of this research has been to understand the variables that drive the success of Mergers and Acquisitions as a mode of entry in Emerging Markets. The research looks at the application of these variables my multinational corporations from both emerging markets and those from developed markets; the aim is to ascertain if these variables are applied differently depending on the type of economy a multinational originates from.Given the saturation of developed markets multinationals have embarked on growth strategies into emerging markets where these markets are perceived as untapped, however most have failed to realise shareholder value as a result of the dynamics and challenges that these economies bring.Fukao et al. 2005 suggests that market share is one of the most useful means used in assessing the structure of the market and a particularly desirable characteristic of a target firm. This is usually couched in terms of having a ―good market position‖ in the relevant market. The specific target criterion is of special consideration in sectors which may show a high degree of stability of market structure (as compared to those which are characterized by technology intensity, low entry barriers and powerful competition, showing high volatility of market shares). As a result, it is expected that the market share variable will bear a positive coefficient in explaining the likelihood of foreign acquisition.The research proved successful that the application of the variables that determine success of an acquisition and merger between multinationals was similar and what drove this success was mainly based on experience in doing mergers and acquisitions. These led to further insights for current and future work on the topic.