The main locomotive of foreign direct investment is foreign mergers and acquisitions. In a rapidly changing global environment, M&A transactions have become one of the most important strategic initiatives of multinational companies. In this article, check 3 ways M&A pipeline management software can accelerate deal-making.
How to Accelerate Deal-making?
Companies from emerging economies entering foreign markets do not follow the logic predicted by the dominant theoretical approaches in international business. For example, they often choose a resource-intensive exit route such as M&A, which contradicts the Uppsala Model’s theory of gradual internationalization. Researchers note that overseas M&A deals are used by companies from emerging economies to gain strategic resources, technological inventions, global brands, and others, in words to compensate for the lack of competitive advantage.
Some companies, such as Lenovo or Tata, which have grown through acquisitions of well-known Western companies (IBM and Jaguar, respectively) have already become leaders on the world stage. Data room reviews of other companies are still in the early stages of internationalization and are just learning how to cope with the challenges of the international environment. Catching up with their competitors, companies from developing countries use M&A to develop their technological capabilities and competitive advantages.
3 Ways How M&A Pipeline Management Software Can Accelerate Deal-making
Deal-making is also of practical relevance for businesses conducting international operations, including M&A. Namely, the study indicates why the plan for an overseas M&A transaction may remain unfulfilled or be implemented in a modified form, as well as what environmental factors, especially institutional ones, should be taken into account when planning an overseas takeover.
- The usage of the process approach. The process approach is used to study non-linear, complex causal relationships, it can identify why and how certain events or changes occur. Process models exist to understand how a firm evolves and develops its skills and capabilities. In the literature on international business, the process approach is used much less often than the static one, although many academics pointed out the need to use this approach.
- Learning the motives and driving factors of MNCs to make foreign investments, the determinants of choosing a foreign market, the method of M&A (full or partial), approaches to the integration of companies, etc., with special attention paid to environmental factors and contextual features. The implementation of an overseas M&A transaction depends on many factors: political events, macroeconomic changes, the institutional environment of the foreign market, and the country of origin. Institutional factors have been identified as being critical to overseas M&A transactions, but studies provide conflicting results regarding the direction of these factors ‘influence on MNCs’ behavior abroad.
- The usage of the institutional approach. The institutional approach has become especially popular due to the growth of international activity of MNEs from countries with emerging economies. Moreover, the dominant theoretical concept of internationalization – the eclectic (OLI) paradigm of J. Dunning seriously criticized by scientists precisely for the lack of attention to institutions.
Those 3 ways of how M&A pipeline management software can accelerate deal-making emphasize the importance of creating conditions for the exchange of knowledge and practices of conducting foreign operations in the business environment, as well as institutional support for companies in the home market.