Cross-border acquisitions play an important role in corporate strategic development and international expansion. During the past decades, mergers and acquisitions have been intensively researched through the lenses of strategic management, corporate finance, behavioral finance, etc. Despite the intense effort, the progress made is still fragmented and lacks unifying theories that approach the entire acquisition process on the one hand, and in-depth research of critical factors on the other. The intent of the research paper is to establish a vital link between academic research and practice of mergers and acquisitions, especially regarding the pre-acquisition evaluation.

In detail, the research paper investigates critical factors – and their inclusion in the pre-acquisition due diligence, before decision about acquisition is made. Pre-acquisition due diligence theoretically conforms to organizational learning theory, which proposes the more the acquiring firm learns about the acquisition target, the higher the probability of a successful acquisition. The central hypothesis states that due diligence, including the critical factors, in the pre-acquisition phase is related to acquisition success.

Using a multidimensional measure of critical factors, the empirical evidence is based on 85 cross-border acquisitions that took place between 2007 and 2013 in the European automotive industry. The quantitative analysis finds positive association between the Choice of Strategic Partner, Business Capabilities and HR Knowledge, and Financial Factors and Acquisition Premium as critical factors of due diligence and acquisition success. The strongest relationship is between business capabilities and knowledge transfer as the main asset for realization of synergy values and successful acquisition. In this context, the valuation of the business capabilities of the acquisition targets is classified as the main challenge for reflecting suitability of the acquisition price and establishing value generation from the combined firms in the post-acquisition phase.

By studying acquisition risk and critical factors – both success and failure reasons – this research tested and proved theoretically sound framework for successful acquisition. From a practical standpoint, the research results provide acquisition management with a proven model for pre-evaluating acquisition candidates by means of comprehensive due diligence.

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Critical Factors of Pre-Acquisition Due Diligence in Cross-Border Acquisitions

The obviously ever increasing number of corporate acquisitions in recent decades has improved the general knowledge and awareness of due diligence for both the industry and research. In the current challenging business environment, acquisitions face a higher degree of risk profiles, especially cross-border acquisitions in the emerging markets. Conducting a thorough due diligence investigation in the context of an acquisition is more important now than ever. In a broad analysis, this paper researches the key risk factors in the acquisition process and their assessment within a due diligence audit in the acquisition phase. The task of this paper is to match the academic and practical view in order to give a more complete understanding of risk factors to be covered in due diligence audit. The starting point is the research of academic findings which basically concentrate on common approaches considering financial, legal, commercial, and some other issues in domestic acquisitions and in developed countries. In contrast, this paper considers risk factors in cross-border and emerging markets transactions. In addition, a number of business consultants publish studies based on surveys on this topic which reflect typical risk factors based on experience of their customers being involved in cross-border acquisitions. Their risk assessment consists of specific regulatory, political, and other factors, which may lead to commercial and reputational impediments in cross-border acquisitions. The outcome of the comparison is a comprehended list of evaluated risk factors, whereby the academic findings are complemented and supported by the practical experience in the business consultant’s studies. Moreover, the practical approach points to the fact that due diligence scope needs to be suited to the dynamics of the markets. The comparison and the comprehended list of evaluated risk factors call for a more integrated system of due diligence and show herein the research deficit. Hence, the novelty is the compendium of evaluated risk factors which should be assessed in the pre-acquisition phase. The originality of the paper is given by a unique analysis of academic work about acquisition due diligence literature and consultant studies from anonymized practical experience based on insider information.

Due Diligence in Mergers and Acquisitions in Emerging Markets： Evaluated Risk Factors From the Academic and Practical View

O escopo do presente estudo e pesquisar a relacao existente entre os investimentos em intangiveis, notadamente software e publicidade, com a geracao do Fluxo de Caixa Operacional (FCO) em empresas do setor de telecomunicacoes nos anos de 2007 a 2011, listadas na BM&FBOVESPA, e avaliar de que forma eles colaboram para a geracao do FCO e em que proporcao. Os dados foram coletados por meio das demonstracoes contabeis publicadas. Existem varios tipos de intangiveis relatados na literatura. Nesta pesquisa, foi dada enfase a esses dois elementos patrimoniais por apresentarem maior frequencia e relevância nas demonstracoes contabeis. Foram feitas analises de regressao e correlacao entre as variaveis pesquisadas. Ao final, constatou-se que os investimentos em intangiveis afetam positivamente a geracao de FCO. Os gastos com publicidade e que mostraram um maior grau de eficiencia e contribuicao enquanto os investimentos feitos em softwares nao tiveram uma representacao tao acentuada. Esses resultados estao em linha com pesquisas feitas em empresas francesas e africanas neste mesmo ramo.

http://rbc.cfc.org.br/index.php/rbc/article/download/1248/909

Intangíveis no setor de telecomunicações no Brasil

A research was carried out to find out why the Zimbabwe short term insurance industry has not considered mergers and acquisitions as a solution to capitalization challenges. The findings showed that most of the affected companies are not attractive as target companies, though they might be willing to be taken over. There is very little capital in the market and Foreign Direct Investment (FDI) is very limited due to the country risk profile. This reduces the number of potential interests in takeover bargains, though it is generally accepted by the market that mergers and acquisitions can go a long way in normalizing the insurance market and preserving employment. A research was carried out to find out why the Zimbabwe short term insurance industry has not considered mergers and acquisitions as a solution to capitalization challenges. The findings showed that most of the affected companies are not attractive as target companies, though they might be willing to be taken over. There is very little capital in the market and Foreign Direct Investment (FDI) is very limited due to the country risk profile. This reduces the number of potential interests in takeover bargains, though it is generally accepted by the market that mergers and acquisitions can go a long way in normalizing the insurance market and preserving employment.

Why Mergers for Zimbabwean Insurance Companies Are Not Attractive

Der vorliegende Beitrag beschreibt den strukturellen Aufbau und Untersuchungsumfang einer eigenstandigen Due Diligence der IT von Versicherungsunternehmen. Hierzu werden auf Basis einer umfassenden Aufarbeitung der akademischen als auch praxisorientierten Literatur die einzelnen Teilbereiche und Schwerpunktsetzungen bei der Untersuchung der Versicherungs-IT segmentiert sowie ein Ordnungsrahmen fur den strukturellen Aufbau einer IT Due Diligence vorgestellt. Ebenfalls wird der idealtypische Ablauf des Analyseprozesses dargestellt und diskutiert, wie sich die Erkenntnisse einer Due Diligence der IT in der sich anschliesenden Unternehmensbewertung und den Vertragsverhandlungen berucksichtigen lassen. Dabei zeigt sich, dass die Analyse der Versicherungs-IT im Rahmen einer Due Diligence-Prufung organisatorische, technische und rechtliche Aspekte umfasst, welche in Form eigenstandiger Analysefelder strukturiert werden. Die mit der Informationsverarbeitung des zu akquirierenden Unternehmens in Zusammenhang stehenden Chancen- und Risikoaspekte lassen sich entweder als IT-Integrationskosten und Synergien bei der Unternehmenswertermittlung berucksichtigen oder durch die Ausarbeitung umfangreicher Garantie- und Haftungsvereinbarungen absichern.

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Mind the (IT-)System – Ein Vorschlag zur Gestaltung einer IT Due Diligence von Versicherungsunternehmen

Purpose – According to several authors 50 per cent of mergers and acquisitions (M&A) operations destroy value. The aim of this paper is to study the reasons why it happens and to seek to reveal that intangible assets, which are increasingly important in today's economy, must be better assessed during the due diligence phase.Design/methodology/approach – The authors present a part of the French intangible assets measurement approach, which has been published by the French Intangible Assets Observatory. The methodology proposes an extended balance sheet which is an interesting addition to the IAS‐IFRS intangible standard. It identifies 12 classes of intangible assets including human capital and customer capital.Findings – The paper proposes a due diligence approach, using the French methodology and applies it to the insurance sector.Research limitations/implications – This paper is not an academic paper. However, a significant research program is now underway in France. Academic publications are expected to...

Alan Fustec

Papers

Mergers and acquisitions in the insurance sector: reducing information asymmetry