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95-607: The Overseas Investment Office is the New Zealand government agency responsible for regulating foreign direct investment into New Zealand. The Office is responsible for high value investments (2006: NZD $ 100m+), investments in sensitive land and investments in fishing quota . The Office is part of Land Information New Zealand , the New Zealand Government Agency responsible for survey, land valuation, land titles and mapping. This link recognises that

190-607: A ' rubber-stamping ' body doing nothing against increasing foreign control over New Zealand assets. In 2007 spokesman Murray Horton said the sale of large farms to foreign buyers, including the high country station bought by Canadian country singer Shania Twain , drives up prices and makes it harder for young New Zealanders to become farmers. In 2009, Wanganui brothers Allan and Frank Crafar owned 18 dairy farms and had 20,000 cows, making them New Zealand's largest family owned dairy business. Following allegations of animal cruelty , they went into receivership. In 2012, 16 of their farms in

285-749: A 34.7% market share of FDI into the Asia-Pacific region. By contrast, FDI out of China in 2013 was $ 8.97 billion, 10.7% of the Asia-Pacific share. As a result of the Great Recession , FDI fell by over one-third in 2009 but rebounded in 2010. China implemented the Foreign Investment Law in 2020. FDI in China dropped to a 30-year-low in 2024, which was attributed to anti-espionage crackdowns from China and an rise in sanctions for industries like semiconductors. Foreign investment

380-405: A business retain just a handful of key players that would have otherwise left. Organizations should move rapidly to re-recruit key managers. It's much easier to succeed with a team of quality players that one selects deliberately rather than try to win a game with those who randomly show up to play. Mergers and acquisitions often create brand problems, beginning with what to call the company after

475-569: A business, which accrues to both categories of stakeholders, is called the Enterprise Value (EV), whereas the value which accrues just to shareholders is the Equity Value (also called market capitalization for publicly listed companies). Enterprise Value reflects a capital structure neutral valuation and is frequently a preferred way to compare value as it is not affected by a company's, or management's, strategic decision to fund

570-473: A function of their acquisition activity. Therefore, additional motives for merger and acquisition that may not add shareholder value include: The M&A process itself is a multifaceted which depends upon the type of merging companies. The M&A process results in the restructuring of a business's purpose, corporate governance and brand identity. An arm's length merger is a merger: ″The two elements are complementary and not substitutes. The first element

665-406: A greater proportion of capital will engage in capital-intensive industries. However, such a theory makes the assumption that there is perfect competition , there is no movement of labour across country borders, and the multinational companies assumes risk neutral preferences . In 1967, Weintraub tested this hypothesis by collecting United States data on rate of return and flow of capital. However,

760-433: A larger and/or longer-established company and retain the name of the latter for the post-acquisition combined entity. This is known as a reverse takeover . Another type of acquisition is the reverse merger , a form of transaction that enables a private company to be publicly listed in a relatively short time frame. A reverse merger is a type of merger where a privately held company, typically one with promising prospects and

855-426: A merger or acquisition transaction can range from political to tactical. Ego can drive choice just as well as rational factors such as brand value and costs involved with changing brands. Beyond the bigger issue of what to call the company after the transaction comes the ongoing detailed choices about what divisional, product and service brands to keep. The detailed decisions about the brand portfolio are covered under

950-444: A much greater challenge. Mergers and acquisitions Technically, a merger is the legal consolidation of two business entities into one, whereas an acquisition occurs when one entity takes ownership of another entity's share capital , equity interests or assets . From a legal and financial point of view, both mergers and acquisitions generally result in the consolidation of assets and liabilities under one entity, and

1045-464: A narrow sense, foreign direct investment refers just to building new facility, and a lasting management interest (10 percent or more of voting stock) in an enterprise operating in an economy other than that of the investor. FDI is the sum of equity capital , long-term capital, and short-term capital as shown in the balance of payments . FDI usually involves participation in management, joint-venture , transfer of technology and expertise. Stock of FDI

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1140-444: A need for financing, acquires a publicly listed shell company that has few assets and no significant business operations. The combined evidence suggests that the shareholders of acquired firms realize significant positive "abnormal returns," while shareholders of the acquiring company are most likely to experience a negative wealth effect. Most studies indicate that M&A transactions have a positive net effect, with investors in both

1235-695: A report from the Eurasian Development Bank revealed that Kazakhstan boasted the highest FDI stock value from the Eurasian Economic Union (EAEU) with $ 11.2 billion by 2020 and an increase of over $ 3 billion since 2017. According to the World Bank, Armenia takes the first place in terms of FDI appeal among Commonwealth of Independent States. The Armenian government has created a favorable environment for foreign investments by introducing new laws and conditions. The country

1330-434: A situation where one company splits into two, generating a second company which may or may not become separately listed on a stock exchange. As per knowledge-based views, firms can generate greater values through the retention of knowledge-based resources which they generate and integrate. Extracting technological benefits during and after acquisition is an ever-challenging issue because of organizational differences. Based on

1425-550: A special committee of independent directors; and 2) conditioned on an affirmative vote of a majority of the minority stockholders, the business judgment standard of review should presumptively apply, and any plaintiff ought to have to plead particularized facts that, if true, support an inference that, despite the facially fair process, the merger was tainted because of fiduciary wrongdoing.″ A Strategic merger usually refers to long-term strategic holding of target (Acquired) firm. This type of M&A process aims at creating synergies in

1520-456: A topic of in-depth analysis concerns countries such as Brazil, Peru, Colombia, and Argentina. As Chevillote Delgado mentions in his study, Latin America is a land of opportunities and at the same time, it is within the expansion spectrum for some investors, as currently, Brazil holds an important position, as its growth over a period of 15 years has been fruitful. Digging deeper, this region of

1615-468: A total value of US$ 2,164.4 bil. Some of the largest mergers of equals took place during the dot-com bubble of the late 1990s and in the year 2000: AOL and Time Warner (US$ 164 bil.), SmithKline Beecham and Glaxo Wellcome (US$ 75 bil.), Citicorp and Travelers Group (US$ 72 bil.). More recent examples this type of combinations are DuPont and Dow Chemical (US$ 62 bil.) and Praxair and Linde (US$ 35 bil.). An analysis of 1,600 companies across industries revealed

1710-456: Is friendly or hostile . Achieving acquisition success has proven to be very difficult, while various studies have shown that 50% of acquisitions were unsuccessful. "Serial acquirers" appear to be more successful with M&A than companies who make acquisitions only occasionally (see Douma & Schreuder, 2013, chapter 13). The new forms of buy out created since the crisis are based on serial type acquisitions known as an ECO Buyout which

1805-478: Is a co-community ownership buy out and the new generation buy outs of the MIBO (Management Involved or Management & Institution Buy Out) and MEIBO (Management & Employee Involved Buy Out). Whether a purchase is perceived as being "friendly" or "hostile" depends significantly on how the proposed acquisition is communicated to and perceived by the target company's board of directors, employees, and shareholders. It

1900-426: Is a triangular merger, where the target company merges with a shell company wholly owned by the buyer, thus becoming a subsidiary of the buyer. In a "forward triangular merger ", the target company merges into the subsidiary, with the subsidiary as the surviving company of the merger; a "reverse triangular merger" is similar except that the subsidiary merges into the target company, with the target company surviving

1995-425: Is between two competitors in the same industry. A vertical merger occurs when two firms combine across the value chain, such as when a firm buys a former supplier (backward integration) or a former customer (forward integration). When there is no strategic relatedness between an acquiring firm and its target, this is called a conglomerate merger (Douma & Schreuder, 2013). The form of merger most often employed

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2090-399: Is combined into another entity by operation of the corporate law statute(s) of the jurisdiction of the merging entities. In a transaction structured as a merger or an equity purchase, the buyer acquires all of the assets and liabilities of the acquired entity. In a transaction structured as an asset purchase, the buyer and seller agree on which assets and liabilities the buyer will acquire from

2185-425: Is complete, the parties may proceed to draw up a definitive agreement, known as a "merger agreement", "share purchase agreement," or "asset purchase agreement" depending on the structure of the transaction. Such contracts are typically 80 to 100 pages long and focus on five key types of terms: Following the closing of a deal, adjustments may be made to some of the provisions outlined in the purchase agreement, such as

2280-824: Is distinguished from foreign portfolio investment, a passive investment in the securities of another country such as public stocks and bonds , by the element of "control". According to the Financial Times , "Standard definitions of control use the internationally agreed 10 percent threshold of voting shares, but this is a grey area as often a smaller block of shares will give control in widely held companies. Moreover, control of technology, management, even crucial inputs can confer de facto control." Before Stephen Hymer 's landmark work on FDI in 1960, no theory existed that dealt specifically with FDI. However, there are theories that dealt generally with foreign investments. Both Eli Heckscher (1919) and Bertil Ohlin (1933) developed

2375-563: Is guaranteed for international investors under the law "On Foreign Investments." Additionally, it guarantees the protection of foreign capital invested in Armenian businesses and permits limitless involvement. Research shows that Cyprus, Germany, Netherlands, UK, and France have made an altogether investment in an amount 1.4 USD billion in the period 2007-2013. This region of the world maintains foreign direct investment with certain peculiarities compared to countries previously shown. Therefore,

2470-426: Is important because the directors have the capability to act as effective and active bargaining agents, which disaggregated stockholders do not. But, because bargaining agents are not always effective or faithful, the second element is critical, because it gives the minority stockholders the opportunity to reject their agents' work. Therefore, when a merger with a controlling stockholder was: 1) negotiated and approved by

2565-475: Is important to highlight that thanks to China's investment in Latin America, this region has become the backbone for its amenities as expressed in "Foreign Direct Investment in Latin America". Despite the wealth of Latin America, there are multiple factors that push investors to think twice about their capital within Latin America, as political instability, violence, and sociocultural factors can represent

2660-412: Is normal for M&A deal communications to take place in a so-called "confidentiality bubble," wherein the flow of information is restricted pursuant to confidentiality agreements. In the case of a friendly transaction, the companies cooperate in negotiations; in the case of a hostile deal, the board and/or management of the target is unwilling to be bought or the target's board has no prior knowledge of

2755-512: Is not limited to investment of excess profits abroad. In fact, foreign direct investment can be financed through loans obtained in the host country, payments in exchange for equity (patents, technology, machinery etc.), and other methods. The main determinants of FDI is side as well as growth prospectus of the economy of the country when FDI is made. Hymer proposed some more determinants of FDI due to criticisms, along with assuming market and imperfections. These are as follows: Hymer's importance in

2850-418: Is not necessarily a movement of funds from a home country to a host country, and that it is concentrated on particular industries within many countries. In contrast, if interest rates were the main motive for international investment, FDI would include many industries within fewer countries. Another observation made by Hymer went against what was maintained by the neoclassical theories: foreign direct investment

2945-415: Is possible only when resources are exchanged and managed without affecting their independence. A corporate acquisition can be structured legally as either an "asset purchase" in which the seller sells business assets and liabilities to the buyer, an "equity purchase" in which the buyer purchases equity interests in a target company from one or more selling shareholders or a "merger" in which one legal entity

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3040-464: Is provided by full-service investment banks- who often advise and handle the biggest deals in the world (called bulge bracket ) - and specialist M&A firms, who provide M&A only advisory, generally to mid-market, select industries and SBEs. Highly focused and specialized M&A advice investment banks are called boutique investment banks . The dominant rationale used to explain M&;A activity

3135-487: Is that acquiring firms seek improved financial performance or reduce risk. The following motives are considered to improve financial performance or reduce risk: Megadeals—deals of at least one $ 1 billion in size—tend to fall into four discrete categories: consolidation, capabilities extension, technology-driven market transformation, and going private. On average and across the most commonly studied variables, acquiring firms' financial performance does not positively change as

3230-452: Is the net (i.e., outward FDI minus inward FDI) cumulative FDI for any given period. Direct investment excludes investment through purchase of shares (if that purchase results in an investor controlling less than 10% of the shares of the company). FDI, a subset of international factor movements , is characterized by controlling ownership of a business enterprise in one country by an entity based in another country. Foreign direct investment

3325-401: Is the foreign direct investment from a source country into a destination country for the purpose of exporting to a third country. The foreign direct investor may acquire voting power of an enterprise in an economy through any of the following methods: Foreign direct investment incentives may take the following forms: Foreign Direct Investment tends to increase with the democracy index of

3420-500: The Federal Trade Commission about any merger or acquisition over a certain size. An acquisition/takeover is the purchase of one business or company by another company or other business entity. Specific acquisition targets can be identified through myriad avenues, including market research, trade expos, sent up from internal business units, or supply chain analysis. Such purchase may be of 100%, or nearly 100%, of

3515-677: The Global Investment in American Jobs Act of 2013 (H.R. 2052; 113th Congress) , a bill which would direct the United States Department of Commerce to "conduct a review of the global competitiveness of the United States in attracting foreign direct investment". Supporters of the bill argued that increased foreign direct investment would help job creation in the United States. In November 2021,

3610-534: The Hudson's Bay Company merged with the rival North West Company . The Great Merger Movement was a predominantly U.S. business phenomenon that happened from 1895 to 1905. During this time, small firms with little market share consolidated with similar firms to form large, powerful institutions that dominated their markets, such as the Standard Oil Company , which at its height controlled nearly 90% of

3705-543: The reform and opening-up economic policies of paramount leader Deng Xiaoping . Foreign direct investment increased considerably in the 2000s, reaching $ 19.1 billion in the first six months of 2012, making China the largest recipient of foreign direct investment at that point of time and topping the United States which had $ 17.4 billion of FDI. In 2013 the FDI flow into China was $ 24.1 billion, resulting in

3800-463: The EU made an investment into Armenian economy since the year of Armenian Independence. European scale-ups that achieve significant growth are frequently acquired by foreign entities, with over 60% of these acquisitions involving buyers from outside the EU, predominantly from the United States. FDI in China , also known as RFDI (renminbi foreign direct investment), largely began in the late 1970s due to

3895-800: The Great Merger Movement were able to keep their dominance in their respective sectors through 1929, and in some cases today, due to growing technological advances of their products, patents , and brand recognition by their customers. There were also other companies that held the greatest market share in 1905 but at the same time did not have the competitive advantages of the companies like DuPont and General Electric . These companies such as International Paper and American Chicle saw their market share decrease significantly by 1929 as smaller competitors joined forces with each other and provided much more competition. The companies that merged were mass producers of homogeneous goods that could exploit

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3990-714: The North Island were sold to a Chinese company Pengxin International Group Limited. Polls done since the sale of the Crafar Farms show an overwhelming majority of New Zealanders were worried about land sales to foreign buyers. By August 2014 the Overseas Investment Office had received a further 33 applications by foreigners to buy large blocks of farmland. They were all approved. In 2016 further concerns were raised when it

4085-511: The OIO would increase its fees, allowing it to increase its staffing by 25% so that it could perform its checks on applicants more effectively. New Zealand First leader Winston Peters commented: "It's a disgrace – this is 2016 and we've had a rubber stamp operation going back almost two decades." Foreign direct investment A foreign direct investment ( FDI ) refers to purchase of an asset in another country, such that it gives direct control to

4180-582: The US respectively. Iranian companies saw some improvement of FDI investment as of 2015 because of JCPOA. Some investment is much needed in Iranian oil industry. By 2023 due to condition of Iranian economy FDI had decreased by 82%. Broadly speaking, the United States has a fundamentally " open economy " and low barriers to the FDI. U.S. FDI totaled $ 194 billion in 2010. Of FDI in the United States in 2010, 84% came from or through eight countries: Switzerland,

4275-623: The United Kingdom, Japan, France, Germany, Luxembourg, the Netherlands, and Canada. A 2008 study by the Federal Reserve Bank of San Francisco indicated that foreigners hold greater shares of their investment portfolios in the United States if their own countries have less developed financial markets, an effect whose magnitude decreases with income per capita. Countries with fewer capital controls and greater trade with

4370-460: The United States also invest more in U.S. equity and bond markets. White House data reported in 2011 found that a total of 5.7 million workers were employed at facilities highly dependent on foreign direct investors. Thus, about 13% of the American manufacturing workforce depended on such investments. The average pay of said jobs was found as around $ 70,000 per worker, over 30% higher than

4465-533: The United States and China have been the top two destinations for FDI. According to a study conducted by EY , France was in 2020 the largest foreign direct investment recipient in Europe, ahead of the UK and Germany. EY attributed this as a "direct result of President Macron 's reforms of labor laws and corporate taxation, which were well received by domestic and international investors alike." Moreover, 24 countries of

4560-450: The acquiring company's stock, issued to the shareholders of the acquired company at a given ratio proportional to the valuation of the latter. They receive stock in the company that is purchasing the smaller subsidiary. There are some elements to think about when choosing the form of payment. When submitting an offer, the acquiring firm should consider other potential bidders and think strategically. The form of payment might be decisive for

4655-512: The acquisition so the team can focus on projects for their new employer). In recent years, these types of acquisitions have become common in the technology industry, where major web companies such as Facebook , Twitter , and Yahoo! have frequently used talent acquisitions to add expertise in particular areas to their workforces. Merger of equals is often a combination of companies of a similar size. Since 1990, there have been more than 625 M&A transactions announced as mergers of equals with

4750-514: The assets and liabilities that pertain solely to the unit being sold, determining whether the unit relies on services from other parts of the seller's organization, transferring employees, moving permits and licenses, and safeguarding against potential competition from the seller in the same business sector after the transaction is completed. From an economic point of view, business combinations can also be classified as horizontal, vertical and conglomerate mergers (or acquisitions). A horizontal merger

4845-581: The assets or ownership equity of the acquired entity. A consolidation/amalgamation occurs when two companies combine to form a new enterprise altogether, and neither of the previous companies remains independently owned. Acquisitions are divided into "private" and "public" acquisitions, depending on whether the acquiree or merging company (also termed a target ) is or is not listed on a public stock market . Some public companies rely on acquisitions as an important value creation strategy. An additional dimension or categorization consists of whether an acquisition

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4940-520: The average pay across the entire U.S. workforce. President Barack Obama said in 2012, "In a global economy, the United States faces increasing competition for the jobs and industries of the future. Taking steps to ensure that we remain the destination of choice for investors around the world will help us win that competition and bring prosperity to our people." In September 2013, the United States House of Representatives voted to pass

5035-446: The business either through debt, equity, or a portion of both. Five common ways to "triangulate" the enterprise value of a business are: Professionals who value businesses generally do not use just one method, but a combination. Valuations implied using these methodologies can prove different to a company's current trading valuation. For public companies, the market based enterprise value and equity value can be calculated by referring to

5130-482: The buyer and target companies seeing positive returns. This suggests that M&A creates economic value, likely by transferring assets to more efficient management teams who can better utilize them. (See Douma & Schreuder, 2013, chapter 13). There are also a variety of structures used in securing control over the assets of a company, which have different tax and regulatory implications: The terms " demerger ", " spin-off " and "spin-out" are sometimes used to indicate

5225-469: The buyer. Hence, the analysis should be done from the acquiring firm's point of view. Synergy-creating investments are started by the choice of the acquirer, and therefore they are not obligatory, making them essentially real options . To include this real options aspect into analysis of acquisition targets is one interesting issue that has been studied lately. See also contingent value rights . Mergers are generally differentiated from acquisitions partly by

5320-472: The challenges of his predecessors, Hymer focused his theory on filling the gaps regarding international investment. The theory proposed by the author approaches international investment from a different and more firm-specific point of view. As opposed to traditional macroeconomics-based theories of investment, Hymer states that there is a difference between mere capital investment, otherwise known as portfolio investment, and direct investment. The difference between

5415-473: The commercial fishing industry. In August 2005, the Commission was abolished and replaced with a scaled-down Overseas Investment Office. The rules were relaxed so that intervention by the OIO is only required when foreign investment involves expenditure of more than $ 100 million. In its first year of existence, the OIO approved $ 14.3 billion in sales to foreign buyers – double the yearly average in

5510-462: The company's current account), liquidity ratios might decrease. On the other hand, in a pure stock for stock transaction (financed from the issuance of new shares), the company might show lower profitability ratios (e.g. ROA). However, economic dilution must prevail towards accounting dilution when making the choice. The form of payment and financing options are tightly linked. If the buyer pays cash, there are three main financing options: M&A advice

5605-469: The company's share price and components on its balance sheet. The valuation methods described above represent ways to determine value of a company independently from how the market currently, or historically, has determined value based on the price of its outstanding securities. Most often value is expressed in a Letter of Opinion of Value (LOV) when the business is being valued informally. Formal valuation reports generally get more detailed and expensive as

5700-420: The content analysis of seven interviews, the authors concluded the following components for their grounded model of acquisition: An increase in acquisitions in the global business environment requires enterprises to evaluate the key stake holders of acquisitions very carefully before implementation. It is imperative for the acquirer to understand this relationship and apply it to its advantage. Employee retention

5795-430: The control of the buyer modified. If the issuance of shares is necessary, shareholders of the acquiring company might prevent such capital increase at the general meeting of shareholders. The risk is removed with a cash transaction. Then, the balance sheet of the buyer will be modified and the decision maker should take into account the effects on the reported financial results. For example, in a pure cash deal (financed from

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5890-443: The country for countries where the share of natural resources in total exports is low. For countries with high natural resource export share, the FDI tends to decrease with a higher democracy index. A 2010 meta-analysis of the effects of foreign direct investment (FDI) on local firms in developing and transition countries suggests that foreign investment robustly increases local productivity growth. From 1992 until at least 2023,

5985-481: The data failed to support this hypothesis. Data from surveys on the motivation of FDI also failed to support this hypothesis. Intrigued by the motivations behind large foreign investments made by corporations from the United States of America, Hymer developed a framework that went beyond the existing theories, explaining why this phenomenon occurred, since he considered that the previously mentioned theories could not explain foreign investment and its motivations. Facing

6080-503: The data, the sectors that attracted higher inflows were services, telecommunication, construction activities and computer software and hardware. Mauritius, Singapore, US and UK were among the leading sources of FDI. Based on UNCTAD data FDI flows were $ 10.4 billion, a drop of 43% from the first half of the last year. In 2015, India emerged as top FDI destination surpassing China and the US. India attracted FDI of $ 31 billion compared to $ 28 billion and $ 27 billion of China and

6175-412: The destination country to produce similar goods. Vertical FDI takes place when a multinational corporation acquires a company to exploit the natural resources in the destination country (backward vertical FDI) or by acquiring distribution outlets to market its products in the destination country (forward vertical FDI). Conglomerate FDI is the combination between horizontal and vertical FDI. Platform FDI

6270-551: The distinction between the two is not always clear. Most countries require mergers and acquisitions to comply with antitrust or competition law . In the United States , for example, the Clayton Act outlaws any merger or acquisition that may "substantially lessen competition" or "tend to create a monopoly ", and the Hart–Scott–Rodino Act requires notifying the U.S. Department of Justice 's Antitrust Division and

6365-405: The efficiencies of large volume production. In addition, many of these mergers were capital-intensive. Due to high fixed costs, when demand fell, these newly merged companies had an incentive to maintain output and reduce prices. However more often than not mergers were "quick mergers". These "quick mergers" involved mergers of companies with unrelated technology and different management. As a result,

6460-468: The efficiency gains associated with mergers were not present. The new and bigger company would actually face higher costs than competitors because of these technological and managerial differences. Thus, the mergers were not done to see large efficiency gains, they were in fact done because that was the trend at the time. Companies which had specific fine products, like fine writing paper, earned their profits on high margin rather than volume and took no part in

6555-573: The field of international business and foreign direct investment stems from him being the first to theorize about the existence of multinational enterprises (MNE) and the reasons behind FDI beyond macroeconomic principles, his influence on later scholars and theories in international business, such as the OLI ( ownership, location and internationalization ) theory by John Dunning and Christos Pitelis which focuses more on transaction costs. Moreover, "the efficiency-value creation component of FDI and MNE activity

6650-473: The global oil refinery industry. It is estimated that more than 1,800 of these firms disappeared into consolidations, many of which acquired substantial shares of the markets in which they operated. The vehicle used were so-called trusts . In 1900 the value of firms acquired in mergers was 20% of GDP . In 1990 the value was only 3% and from 1998 to 2000 it was around 10–11% of GDP. Companies such as DuPont , U.S. Steel , and General Electric that merged during

6745-419: The investment does not impact the definition, as an FDI: the investment may be made either "inorganically" by buying a company in the target country or "organically" by expanding the operations of an existing business in that country. Broadly, foreign direct investment includes mergers and acquisitions , building new facilities, reinvesting profits earned from overseas operations, and intra company loans . In

6840-440: The long run by increased market share, broad customer base, and corporate strength of business. A strategic acquirer may also be willing to pay a premium offer to target firm in the outlook of the synergy value created after M&A process. The term "acqui-hire" is used to refer to acquisitions where the acquiring company seeks to obtain the target company's talent, rather than their products (which are often discontinued as part of

6935-643: The majority of the Office's work relates to the control of sensitive land. The Office replaces an earlier agency called the Overseas Investment Commission . The Overseas Investment Commission (OIC), established in 1973, imposed certain limitations on foreign investment. OIC consent was required for foreign investments that would control 25% or more of businesses or property worth more than NZ$ 10 million. Restrictions and approval requirements also applied to certain investments in land and in

7030-440: The merger. Mergers, asset purchases and equity purchases are each taxed differently, and the most beneficial structure for tax purposes is highly situation-dependent. Under the U.S. Internal Revenue Code , a forward triangular merger is taxed as if the target company sold its assets to the shell company and then liquidated, them whereas a reverse triangular merger is taxed as if the target company's shareholders sold their stock in

7125-429: The most value from a business assessment, objectives should be clearly defined and the right resources should be chosen to conduct the assessment in the available timeframe. As synergy plays a large role in the valuation of acquisitions, it is paramount to get the value of synergies right; as briefly alluded to re DCF valuations. Synergies are different from the "sales price" valuation of the firm, as they will accrue to

7220-417: The offer. Hostile acquisitions can, and often do, ultimately become "friendly" as the acquirer secures endorsement of the transaction from the board of the acquiree company. This usually requires an improvement in the terms of the offer and/or through negotiation. "Acquisition" usually refers to a purchase of a smaller firm by a larger one. Sometimes, however, a smaller firm will acquire management control of

7315-407: The perspective of the investor/source country and host/destination country. On an investor perspective, it can be divided into horizontal FDI, vertical FDI, and conglomerate FDI. In the destination country, the FDI can be divided into import-substituting, export-increasing, and government initiated FDI. Horizontal FDI arises when a multination corporation duplicates its home country industry chain into

7410-492: The previous decade. By 2013 foreign ownership in New Zealand had increased dramatically from $ 9.7 billion in 1989 to $ 101.4 billion – an increase of over 1,000%. Between 1989 and 2007, foreign ownership of the New Zealand sharemarket went from 19% to 41% but has since dropped back to 33%. The agency has been accused by groups like the Campaign Against Foreign Control of Aotearoa as being

7505-446: The purchase price. These adjustments are subject to enforceability issues in certain situations. Alternatively, certain transactions use the 'locked box' approach, where the purchase price is fixed at signing and based on the seller's equity value at a pre-signing date and an interest charge. The assets of a business are pledged to two categories of stakeholders: equity owners and owners of the business' outstanding debt. The core value of

7600-411: The purchaser over the asset (e.g. purchase of land and building). In other words, it is an investment in the form of a controlling ownership in a business, in real estate or in productive assets such as factories in one country by an entity based in another country. It is thus distinguished from a foreign portfolio investment or foreign indirect investment by a notion of direct control. The origin of

7695-446: The rewards for M&A activity were greater for consumer products companies than the average company. For the period 2000–2010, consumer products companies turned in an average annual TSR of 7.4%, while the average for all companies was 4.8%. Given that the cost of replacing an executive can run over 100% of his or her annual salary, any investment of time and energy in re-recruitment will likely pay for itself many times over if it helps

7790-448: The seller. Asset purchases are common in technology transactions in which the buyer is most interested in particular intellectual property but does not want to acquire liabilities or other contractual relationships. An asset purchase structure may also be used when the buyer wishes to buy a particular division or unit of a company that is not a separate legal entity. Divestitures present a variety of unique challenges, such as identifying

7885-442: The seller. With pure cash deals, there is no doubt on the real value of the bid (without considering an eventual earnout). The contingency of the share payment is indeed removed. Thus, a cash offer preempts competitors better than securities. Taxes are a second element to consider and should be evaluated with the counsel of competent tax and accounting advisers. Third, with a share deal the buyer's capital structure might be affected and

7980-414: The size of a company increases, but this is not always the case as the nature of the business and the industry it is operating in can influence the complexity of the valuation task. Objectively evaluating the historical and prospective performance of a business is a challenge faced by many. Generally, parties rely on independent third parties to conduct due diligence studies or business assessments. To yield

8075-490: The target company to the buyer. The documentation of an M&A transaction often begins with a letter of intent . The letter of intent generally does not bind the parties to commit to a transaction, but may bind the parties to confidentiality and exclusivity obligations so that the transaction can be considered through a due diligence process involving lawyers, accountants, tax advisors, and other professionals, as well as business people from both sides. After due diligence

8170-471: The theory of foreign investments by using neoclassical economics and macroeconomic theory. Based on this principle, the differences in the costs of production of goods between two countries cause specialisation of jobs and trade between countries. Reasons for differences in costs of production can be explained by factor proportions theory. For example, countries with a greater proportion of labour will engage in labor-intensive industries while countries that have

8265-658: The topic brand architecture . Most histories of M&A begin in the late 19th century United States. However, mergers coincide historically with the existence of companies. In 1708, for example, the East India Company merged with an erstwhile competitor to restore its monopoly over the Indian trade. In 1784, the Italian Monte dei Paschi and Monte Pio banks were united as the Monti Reuniti. In 1821,

8360-547: The transaction and going down into detail about what to do about overlapping and competing product brands. Decisions about what brand equity to write off are not inconsequential. And, given the ability for the right brand choices to drive preference and earn a price premium, the future success of a merger or acquisition depends on making wise brand choices. Brand decision-makers essentially can choose from four different approaches to dealing with naming issues, each with specific pros and cons: The factors influencing brand decisions in

8455-409: The two, which will become the cornerstone of his whole theoretical framework, is the issue of control, meaning that with direct investment firms are able to obtain a greater level of control than with portfolio investment. Furthermore, Hymer proceeds to criticize the neoclassical theories, stating that the theory of capital movements cannot explain international production. Moreover, he clarifies that FDI

8550-406: The way in which they are financed and partly by the relative size of the companies. Various methods of financing an M&A deal exist: Payment by cash. Such transactions are usually termed acquisitions rather than mergers because the shareholders of the target company are removed from the picture and the target comes under the (indirect) control of the bidder's shareholders. Payment in the form of

8645-415: The world is not only the investment space for multinational companies in greater number due to its natural resources, but also because of the population settled here, as it is around 630,089,000 inhabitants. However, the availability of raw materials in large quantities may represent a future weakness, as not all are renewable. The mining and oil industries are on the rise, so in terms of growth percentages, it

8740-570: Was further strengthened by two other major scholarly developments in the 1990s: the resource-based (RBV) and evolutionary theories" In addition, some of his predictions later materialized, for example the power of supranational bodies such as IMF or the World Bank that increases inequalities (Dunning & Piletis, 2008). A phenomenon the United Nations Sustainable Development Goal 10 aims to address. The types of FDI investments can be classified based on

8835-557: Was introduced in 1991 under Foreign Exchange Management Act (FEMA), driven by then finance minister Manmohan Singh . India disallowed overseas corporate bodies (OCB) to invest in India . India imposes cap on equity holding by foreign investors in various sectors, current FDI in aviation and insurance sectors is limited to a maximum of 49%. A 2012 UNCTAD survey projected India as the second most important FDI destination (after China) for transnational corporations during 2010–2012. As per

8930-455: Was named 'The Caucasian Tiger' because of its dynamic economy. Some of the measures to attract FDI include free economic zones (FEZ) with relaxed laws, also, profit tax, VAT, and property tax benefits. In particular, The Most Favored Nation (MFN) and National Treatment regimes are in effect, and the government has chosen a "open door" policy with ongoing legal protection to encourage international investment. A highly beneficial business environment

9025-548: Was revealed the OIO failed to vet two overseas buyers, Rafael and Federico Grozovsky, who bought a farm in Onetai for $ 6 million. The sale was approved by the OIO in 2014 but the agency was unaware the brothers who bought the property were convicted of polluting a river in Argentina in 2012. The pollution was caused by toxic chemicals from a tannery company the brothers owned. In response to these revelations, John Key announced

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