Failures of Cross Border Mega Mergers Research Paper

Failures of Cross Border Mega Mergers - Research Paper Example According to Ghemawat and Ghadar (2000), global mergers are made for a completely misguided and wrong reason. I support the arguments that the two authors advanced in their article,’ dubious logic of global mega-mergers. Nothing more explains the wrong reasoning behind the mergers except the levels of their failures. There much that should, therefore, guide international businesses while considering an international merger. This paper provides illustrations to support my position on this matter. Failures in cross border mega-mergers Ghemawat and Ghadar (2000) argues that the wisdom of the ‘winner takes it all’ in globalization and mega-mergers is misplaced and has no empirical evidence to support it. The craze for globalization has had no significant impact on the financial strengths and growth of a given company. To them, there is a need for executives to stop pursuing the biases that have led them to make mega-mergers and cross border deals. Globalizations have different facets, which are more economically viable as opposed to needless expansion. Cross border mergers are viewed by investment analysts as a way of making entries into a foreign market, and several reasons explain the high number of cross border mega-mergers around the globe. However, the high number of failures and low business experienced after international mergers strengthen the stand taken by Ghemawat and Ghadar (2000). The significant number of cross border mega failure has resulted in increased studies to ascertain whether the craze for acquisition and mergers is outplaced. Ghemawat and Ghadar (2000) are of the view that the increased number of crossed border mergers and acquisitions are a waste of resources and time to the companies as they are bound to fail. The process of expansion into new borders and foreign lands has a number of economic factors that need to be put into consideration. These include the foreign currency of operation, the socio-cultural and politica l set up of the nation and the political stability; therefore, any organization must factor in all these factors before making a step towards acquisition and mergers in foreign states (Sudekum, 2009). In cross border mergers, companies that have their headquarters and operation bases in different countries and regions come together and merge their operations, this results into the merger of different political and social settings that affect the operations of a business. Political, social and economic differences between countries make globalization and cross border mergers a tough undertaking. Differences in the fiscal policies also present a number of challenges to companies operating in foreign settings. The harmonization of fiscal policies even in the European Union has not created a business environment that is economically and politically homogenous. International labor laws in organizations also differ significantly. This present challenges to companies operating in new econo mic and political setups (Hughes, 2012). In the process of finalizing cross border mergers, companies tend to overlook essential factors and this has created failures in a number of mega-mergers.