What are cross-border alliances?
an investment vehicle where profits and other responsibilities are assigned to each party according to their contract. Each part has a separate legal entity and their own liabilities
What are equity modes?
involves foreign investors purchasing shares of an enterprise in a country besides their own. This can be through M&A
What is the difference in HRM between equity and non-equity cross-border alliances?
It depends on the extent of specific HR measures used
Define merger
an agreement between two companies to join operations together. Ex: Benz + Chrysler = Daimler Chrysler
Define Acquisition
when one company buys another company with the interest of controlling the activities of the combined operations
Reason to engage in M&A
by entering markets quicker because they are more likely to strengthen their market positions and exploit market opportunities
Factors in deciding a target country
- growth in the acquiring company
- risk diversification
- technological advancements
- government response
- exchange rate advantages
Define Consolidation
merging core businesses and creating a new structure. Ex: citicorps + travel insurance group = citigroup
Define hostile takeover
the acquiring firm purchases a significant stake in the target company to gain a controlling interest. Ex: Kraft to Cadbury
Define tender offer
one company will offer to buy outstanding stocks of another company at a specific price rather than the market price
What are the phases of cross border M&A
- pre M&A
- due dilligence
- integration planning
- implementation and assessment
Explain the Pre M&A phase
- identifying people-related issues (are countries compatible)
- assessing people and their mood
- organizational and cultural fit
- educating people about HR implications because HR needs to be transparent with employees
Explain the due diligence phase
- estimating the transaction and ongoing costs, savings and identifying the cultural issues
Explain the integration planning phase
- develop culture-sensitive communication strategies (being truthful to employees)
- design retention programs (how they can stay)
- plan and lead the efforts (how to get both companies and cultures on board)
- help people within the organization deal with change (create a smooth transition)
Explain the implementation and assessment phase
- manage ongoing change (measure people’s attitudes)
- align HR policies
- manage employee communication
- ensure companies provide a greater effect and offer incentives
Horizontal merger
two companies that are in direct competition and share the same product lines and markets
Vertical merger
a customer and company or supplier and company
Congeneric mergers
two businesses that serve the same consumer base in different ways such as Tv manufacture and cable company
Market-extension merger
two companies that sell the same products in different markets
Product-extension merger
two companies selling different but related products in the same market
Conglomeration merger
two companies that have no common business areas
