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RAVINNA KAJANDREN                (MC180606870) PRASENJIT MANIMARAN             (MC180606983) VIMALAN RAVINDRAN                (MC181007799) DAARSHAN MANISELVAN            (MC181007807) 

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MERGER  Combination of two companies                    to form one  

ACQUISITION An action of a company taking over an existing company 

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Mergers and acquisitions: a review. Part 1 

Driving factors of merger momentum in China: empirical evidence from listed companies 

 Market reaction to the international acquisitions by Chinese firms  

Acquirer-to-target relatedness and target country unfamiliarity in acquisitions 

 What drives cross-border mergers and acquisitions?  

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Cross border merger and acquisition Involve assets and operations of firms belonging  to two different countries. For example :  Volvo Car corporation and  Geely Holding Group  

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Merger waves 1890 - Monopoly 1910 - Oligopoly 1960 - Diversification 1981 - New financing method 1990 - Friendly negotiation for stock swap 2003 - Cross border acquisition 

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Bull and Bear Market Bull market = Rising market Bear market = Declining market

Article Real Scenario When the market is bullish, investors are more optimistic to the merger event leading to a considerable profit earned by the bidding firm around the announcement.  In China, the market had been bull for quite a long time. It had 21% of shares in global retail market in 2019. In the bear market, even M&As are favorable to the stock market, it is still hard to get great benefits for the bidders because of the gloomy and prudential mood filled in the market However, the Covid-19 pandemic had caused a huge drop in it's share and pushed China's market into bear state.

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Country Unfamiliarity - Exploring  into a new country without any experience in it.  Liability of Foreignness - Additional costs that firms operating  outside their home countries.     

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Concept Of Momentum in M&A - Rosen (2006) ;  Wang et al. (2010) Acquirers' stock prices are more likely to increase  when a merger is announced  in a hot market than in a cold market. Momentum effect = past winners realize  consistently higher returns. Reversal effect that past losers realize higher returns. Signalling Theory - Gubbi et al (2010) ; Ning et al. (2014) Acquirers own the advantage in information and  may intentionally and selectively communicate  positive information with investors. Investors are sensitive to far-reaching  development opportunities associated  with acquirers and regard  cross-border M&As as a meaningful signal. Example : Disney and Pixar   

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Resource-based theory - Gubbi et al (2010) ;  Ning et al. (2014) When it is economically unfeasible to develop  knowledge internally, acquisition becomes  the choice to bring in managerial skills and  complementary resources and  to stimulate challenging ideas. Example : OYO and other budget hotels Behavioural theory Behavioural finance sees  corporate policies as a response to market mispricing.   

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Neo-classical theory - Maximize shareholders' wealth Managerial theory                                              Agency cost hypothesis - Due to self interest                                                Disturbance theory Industry level theory                                                  Eat or be eaten theory

BAGB4113 SEMINAR IN GLOBAL STRATEGY

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