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Creating synergies_acquisition premium paid should be less than the value generated by the acquisition.

Team specializing in M&A that can evaluate synergies and provide accurate acquisition premium.

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Collective mental programming that distinguishes one group from other.

Understanding local customers, suppliers, employees and governments are essential to establish successful globalization strategy.

Culture can affect the marketing activities in local areas.

The main factors of culture differences (Hofstede Culture Dimensions Theory) :

1. individualism and collectivism

2. power distance

3. uncertainty avoidance

male and female culture

https://www.hofstede-insights.com/country-comparison-tool?countries=brazil%2Cchile%2Csouth+korea

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The Anam electronics wants to expand it business to Latin American market and they have short listed Brazil and Chile for the purpose. The evaluation for M&A for both the countries have been provided as $8 millions and $8.9 million respectively. The Finance and Global teams are suppose to figure the best country to operate based on their departmental analysis. The finance team wants to make decisions based off the fact that which country can provide most financial profits to the Anam Electronics but Global Department wants to make sure that the culture of the country and overall accommodation is smooth. They want to look for an option that aligns with the companies already set values and agrees with the cultural difference that exists between the 2 work cultures.

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Foreign direct Investments_creating operating profits through ownership and management of real assets. owning at least 10% of the company.

Indirect Investments_aimed at earning financial incomes such as dividends and interest. less than 10% ownership.

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Why?

estimating the financial value of a company helps determine the appropriate acquisition price.

influence the investment decision and helps justify the investment in long term.

Calculating synergy effect

VAB=VA+VB+p , where VA= valuation of firm A, VB= valuation of firm b and VAB refers to the combined valuation of firms A and B after acquisition. p=synergy effect

p=VAB-(VA+VB)

for successful M&A p>0

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Discounted Cash Flow Approach

Today's firm value is sum total of the present cash flow that the company expects to generate in the future.

Free cash Flow (FCF) is the pure cash flow that remains after subtracting all the investments required for regular operations of the firms.

Higher the FCF, higher the corporate valuation of the firm.

usually estimated for 3-5 years in the future.

after these years of estimates, it is assumed to grow at a "permanent growth rate". The value calculates there after is called Terminal value.

The future value can be obtained by multiplying the current value with the future value interest Factor.

Future value element is the future value of 1 won after the period of n years with assumed interest rate of R%.

FVIF=(1+R)^n

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Increased sales through market dominance_ acquiring the company in the same industry to reduce competition, increase prices and create exclusive profits/ should be careful of Fair Trade commission, as there will be increased monitoring to curb monopolies. Possible Sanctions.

Cost saving benefits along with profitability as the economies of scale will reduce the production cost which will be profitable to the acquiring company.

Vertical integration can lead to reduced cost by having a raw material and distributor.

Replacement of the inefficient employees of the acquired company.

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the process of solving various issues that may arise from different organizational cultures and nationalities of the people.

necessity to transfer management resources and competencies between them.

natural integration of the companies will determine the success of the M&A.

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Integration is completed by integrating strategies, processes, organizations and cultures of the two companies.

Cultural integration takes the most efforts and time among all the integrations, and is considered the core of integration success.

Around 60% of the mergers failed after the deal was sealed because of lack of PMI activities.

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Culture Integration is assimilating different corporate cultures, values, communication styles, reporting style, regulations and personal relationships among the two companies.

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Present Value=Future Value*Reciprocal of Future value element which is also called as the present value discount value.

PV=FV*1/(1+R)^n

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1. Team specializing in M&A

2. Strategic review

3. Corporate valuation

4. Negotiating the terms of M&A

5. Building integrated Task force following the acquisition.

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Should aim at creating new corporate culture that assimilates both cultures and creates new values.

Management should be aware of the anxiety of the employees.

Mutual visits and culture exchange must be encouraged.

Exercise mutual trust and harmony among the acquired and acquiring company.

Combine cultural strengths and encourage company wide participation and labor management.

Acquiring company should actively utilize the management localization and not act like a dictator. Giving authority will help build trust among the acquired company.

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M&A is a type of Direct investment usually aimed at merging and acquiring a company's management, operations and core competencies.

it is agreed upon as it can help increase the shareholder value for both the acquiring and target.

saves time required for market entry, usually preferred in industries with idle facilities and saturated technology use.

preferred by acquiring company to achieve economies of scale and scope

doesn't require starting the company from the roots.

often companies from developing countries take on the local companies in developed countries to quickly acquire their efficient technology.