Introduction

Cross border M&As are a form of foreign direct investment (FDI). FDI comes in two forms; Greenfield investments and cross border mergers and acquisitions (M&As). With Greenfield investments, a foreign investor establishes a new venture in the host country. Cross border M&As occur when a foreign investor purchases or acquires an existing enterprise in the host country. Acquisitions are dominant forming about 97% of cross border M&A activity. Cross-border M&As are a part of economic life in a liberalizing and globalizing world (UNCTAD, 2000). They are an important means through which MNCs create a global presence. Most of the growth in international production in recent times has taken place through cross border M&A activity. While M&As can be undertaken for many different reasons, the role of speed and the quest for strategic assets are pointed out as being especially important (UNCTAD, 2000). Cross bor-der M&As may be horizontal, vertical or conglomerate in nature. Horizontal M&As are more popular since the acquirer or pur-chaser presumably has a greater chance of adding value to the ac-quired firm. Cross border M&As occur in waves and during these waves, significant volumes and values of transactions take place with major industry restructurings occurring. Six main merger waves have been documented since the early 20th century with the last wave taking place over the period 2003 – 2008. Cross border M&As exhibit the primary virtues of FDI in the host country. These include being an important means of transferring capital, disseminating advanced technology, improv-ing human capital, generating productivity spillovers, stimulat-ing economic growth and providing African countries access to global resources and production networks. For the source country, they provide their MNCs with the opportunity to; diversify their production, access cheaper global resources and strategic assets (skilled labour, lower cost raw materials, finance, scarce natural resources) and increase and stabilize their revenues due to mar-ket diversification. However, cross border M&As are not every-where virtuous. Acquisitions, in particular, arouse concerns, espe-cially over employment, ownership and the level of competition and market structure in the host country. These concerns become urgent when the host economy is a developing one (UNCTAD, 2000). This is because institutions and regulatory frameworks are weaker in developing countries. Download the full article