The document discusses cross-border mergers and acquisitions (M&A). It defines a cross-border merger as combining the assets and operations of two companies from different countries into a new legal entity. Cross-border M&A has increased significantly since the mid-1990s due to financial liberalization policies. Developed countries saw the value of cross-border M&A grow 20% annually between 1987-1999. More recently, India and China have become increasingly involved in cross-border transactions. The document also outlines trends, patterns, and procedures related to cross-border M&A deals.

1. Cross border M&A
Pritam Jindal

2. What is cross-Boarder Merger
• A cross-border merger is a transaction in which the
assets and operation of two firms belonging to or
registered in two different countries are combined to
establish a new legal entity.
• In a cross-border acquisition, the control of assets and
operations is transferred from a local to a foreign
company, with the former becoming an affiliate of the
latter.

3. Trends and Patterns
• Considerable increase in cross border deals since the
mid 90s and the trend still continues
• A result of financial liberalization policies, government
policies and regional agreements
• Since 1980, total cross border M&A transactions
worldwide have seen a growth at an average of 42%.

4. Developed v/s Developing
• Between the years 1987 to 1999, the value of sales and
purchase in cross border M&A in developed countries
has grown by 20% per annum.
• Until 1996 in the case of Asian region the cross border
M&A were lower mainly due to the regulations prevailed
at that point of time.
• Late 1990s witnessed increase owing to the drastic shift
in policies to attract FDI.

5. World Investment Report
 In the case of Asian continent bulk of the purchases are
made by two countries namely Japan (31 percent) and
Singapore (16percent)
 Japan and Korea tops the list of sales
 China is the fourth dealer both in terms of purchase
(6percent) as well as sales (9 percent).
 Both India and china started with a very low pace of
transactions during the latter part of the 1980s and
picked up during the 1990s.
 Recently (2000 onwards) both of these countries are
involving In cross-border transactions in an
unprecedented manner. India ranks as The 6th largest
purchaser and 5th seller in the Asian region; whereas
China was the 3rd largest purchaser as well as seller .

6. Why??
• New Ways of Raising Capital
 Strengthening of environment of corporate capital
raising
 Direct financing through issue of stocks and corporate
debt has also gained popularity.
 Venture capital
 Use of stocks for financial purchases

7. Trend towards Services and Away from
Manufacturing
• In 2011, among the cross border M&A activities that took
place, only 35% involved manufacturing whereas 65%
involved services
• Pharmaceutical, telecom, banking and life insurance

8. Reasons for Cross Border Deals
Technology Seeking M&A:
 To develop the Technology
 The technology is transferred to the acquiring firm
Market Seeking M&A:
 To expand Market
 Acquirer needs to pay fixed integration cost to the target firm

9. Intensity of Cross Border Mergers
Depends on 2 factors;
All stock deal:
 Low intensity
 Currency conversion will be lesser
 Longer period of time
Cash stock deal:
 Intensity based on the percentage of the cash involved
 Mixed effect on the currency market

10. Inbound M&A
• Inbound M&A are mergers or acquisitions where a
foreign company merges with or acquiresan inbound
company
• Such actions are commonly voluntary and involve stock
swap or cash payment to the target.
• Designated Forex account

11. Procedures involved in Inbound M&A
Before the Transaction:
• Apply for opening DFA
• use of the proceeds, amount of foreign currency to be
received, approval of the transaction from MOFCOM or its local
counterpart need to be submitted.
After the Transaction:
• Should apply to SAFE to deposit the foreign currency into the
Designated Forex Account
• Application statement, share transfer agreement, most recent audited
report of the target, deposit notice issued by the bank and capital
verification report of the target

12. Outbound M&A
Outbound M&A means, the Companies which has origin in India
and making and initiative in investments in the foreign based
companies.
Application Procedure:
• remittance exceeds the amount of $30,000, needs to acquire a
Tax Certificate
• agreements or other documents setting forth the rights and
obligations of both parties,
• the invoices or other documents of the foreign organization
requesting payment,
• the tax payment certificate or approval document for tax
exemption

13. Acquirer Company Industry
Targeted Company Deal Value (In
Billions)
Tata Steel Corus () $12.2 Steel
Hindalco Industries Novelis Inc () $6 Aluminium
Oil & Natural Gas Imperial Energy PLC () $2.8 Oil & Gas
Corp(ONGC) Videsh Ltd
Tata Motors Ltd Jaguar & Land $2.3 Automotive
Rover Operations ()
Suzlon Energy Ltd RE Power $1.7 Power & Energy
()
Essar Steel Holdings Algoma Steel Inc () $1.58 Steel
Limited
United Spirits Whyte & Mackay () $1.11 Breweries &
Distilleries
Tata Power PT Kaltim Prima Coal; PT $1.10 Power & Energy
Arutmin (30% Stake - )
GMR Infrastructure Ltd InterGen NV (50% - Stake ) $ 1,10 Power & Energy
Tata Chemicals Limited General Chemical () $1 Plastic & Chemicals