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Strategic Management - Strategy Formulation

International Scenario - Mergers and Acquisitions

   Posted On :  26.06.2018 09:40 pm

We will now survey different nations to have a feel of mergers and acquisitions taking place globally.

International Scenario
 
 
We will now survey different nations to have a feel of mergers and acquisitions taking place globally.
 

USA

 
The US government promotes free competition. However M & A result in monopolistic situations where barriers are created for entry of small firms. The Sherman Anti Trust Act of 1890 restricts building up monopoly beyond a market share of 75%. US law prohibits horizontal mergers. In the US 75% of the M&As are failure while in UK 8 out of 9 is failures. In US M&As resulted in legal battles. Huge legal costs and waste of time are common.
 

Japan

 
Adopted from US and revised in 1977, the Japanese policy allows break up of powers to companies with a large market share. However, the extent of litigation is low.
 

Europe

 
Market domination is restricted in Rome at 40%, in UK at 25% and in West Germany at 33%. The Federal cartel office may divorce a merger after one year in West Germany. Tax levies on premium values above books values are there. In UK the Monopolies & Mergers Commission tends to delay and restrict creation of monopolies. The Restrictive Trade Practices Act of 1956 & Company Fair Trading Act of 1975 and Consolidating Act of 1975 control the power of concentrated private companies. In 1978, it was reviewed that concentration is required for international trade in UK
 
 
In France, Control of merger started in 1977. Mergers (horizontal) causing market share of 40% and mergers with companies of a market share of over 25% are allowed when advantages out weigh disadvantages. Take over bids are to be submitted to bankers, chamber syndicates and stock brokers appointed by the ministry of economy. The proposals should be published in newspapers and must undergo extended legal formalities. The share holders should be informed and the stock movements regulated.
 
 

India

 
The companies Act brought the system misused by British to an end in 1956. The Government also controls the number and remuneration of Board of Directors. The companies are restricted in loans given to other companies to avoid interlocking of funds.
 
The MRTP Act of 1970 and FERA of 1973 impose control in the conduct of companies. MRTP act restricts concentration of economic power and encourages free trade. The asset limit for MRTP firms is
raised to          Rs.1000 million.

FERA gives guidelines for foreign business in India. Permissible foreign shareholding is 74% and in other manufacturing items’ like construction, consultancy & non tea plantation the limit is 40%. 
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