INTERNATIONAL MERGERS AND ACQUISITIONS: PAST, PRESENT AND FUTURE Pervez N. Ghauri and Peter J. Buckley INTRODUCTION Mergers and acquisitions (M&As) have played a dominant role in the world economy for the past ten years. In 1998, mergers were worth US$2.4 trillion worldwide, a 50% increase on 1997, which was itself a record year. In 1999, this figure exceeded US$3.3 trillion and in 2000 US$3.5 trillion. In Europe, a major M&A activity area, the value of M&As rose to $1.2 trillion in 2002. The pace of M&A activity has slowed down in the last two years, mainly because no mega mergers, over $50 billion, were announced in these years. We define a merger as combination of assets of two previously separate firms into a single new legal entity. In a takeover or acquisition, the control of assets is transferred from one company to another. In a complete takeover, all the assets of the acquired company are absorbed by the acquirer; and the takeover “victim” disappears. In fact, the number of mergers in ‘mergers and acquisitions’ is almost vanishingly small. Less than 3% of cross border M&As by number are mergers (UNCTAD, 2000, p. 99). Full or outright acquisitions (100% control) accounted for more than half of all cross border M&As in 1999, although the proportion was lower in developing countries, largely because of legislation. In reality, even when mergers are supposedly between equal partners, most result in one partner dominating the other. The number of “real” mergers is so insignificant, that for practical purposes “M&As” should be simply referred to as “acquisitions” (UNCTAD, 2000, p. 99). Advances in Mergers and Acquisitions, Volume 2, pages 207–229. © 2003 Published by Elsevier Science Ltd. ISBN: 0-7623-1003-0 207