Foreign Takeovers of Domestic Companies Produce More Benefits than Costs in Surveyed Economies: New APEC Report

A new APEC report has found that cross-border mergers and acquisitions produced more benefits than costs and added to the competitiveness of the host economy.

The report also found a direct correlation between overall economic performance and the relative openness of an economy to cross-border mergers and acquisitions.

The report, "Cross-Border Mergers & Acquisitions: Case Studies of Korea, China and Hong Kong, China" has been presented to the first round of APEC meetings for 2004 currently taking place in Santiago, Chile.

Compiled by the APEC Investment Experts' Group (IEG), the report explores the impacts of cross-border mergers and acquisitions in a framework that can be applied across the APEC Region.

Acting Chair of the IEG, Mr. Ramon Vicente T Kabigting, said he hoped the findings in the report would help to improve understanding and reduce investment barriers to foreign investment.

"This report should serve to improve public awareness of the benefits of foreign investment in economies where there is an emotional attachment to particular companies," Mr. Kabigting said.

"Although there will always be legitimate cases that call for upholding the domestic players, we hope this report will enable APEC Member Economies to expedite cooperative policies relating to mergers and acquisitions through lower barriers."

Mr. Kabigting said the report identified a range of benefits to come from cross-border mergers and acquisitions.

"Technology transfer and new research and development centers are one obvious benefit to come from a merger or acquisition with a local company by a foreign company.

"Other benefits came in the form of increased consumer choice or a rise in demand for improved locally produced goods."

The report notes that in the global economy, cross-border mergers and acquisitions have become more important than Greenfield investment, accounting for over 80 percent of foreign direct investment by multinational corporations.

The study drew from analysis of five case studies in Hong Kong, China; Korea and China. The criteria for selection was that the mergers or acquisitions were highly publicized, were drawn from both the manufacturing and services sectors, were between 1999 and 2002 and involved high dollar amounts of between US$16 million and US$5.9 billion.

Click here for the full report.