 Hi students, we are discussing the topic of cross-border alliances and in that we are going to discuss about merger and acquisitions and how do we define them. Merger and acquisitions are one of the most common form of international business market. They have seen a tremendous growth over the last few decades because of the reason of globalization. Why do organizations go for merger and acquisition? Why don't they go for establishing an entire new firm in the local market of the new country? That's because it is difficult to enter the local market of an entirely new culture of a new country and it is difficult to establish an organization from scratch, particularly in a new environment. Merger or acquisition, which means taking over in the local market, merging with them or acquiring them, that is a means of rapid entry into the local market of the new country. That is why organizations go for mergers and acquisitions rather than setting up the organization from scratch. Therefore it is one of the most predominant form of international business systems. According to United Nations Conference on Trade and Development, cross-border mergers and alliances are defined as cross-border M&As involve partial or full takeover or the merging of capital, assets and liabilities of existing enterprises in a country by TNCs, which means transnational corporations from other countries. Mergers and acquisitions are usually defined and taken as one similar concept. There are different concepts. Either there is full takeover of assets, liabilities and existing enterprises or there is partial takeover. So full takeover is acquiring and partial takeover is merger. So it involves purchase of existing assets and companies. So whatever the existing assets and liabilities of the company there are, they are purchased or acquired by the multinational which is trying to enter the new market in a new country. Now what is the difference between merger and acquisition? Merger is the result of an agreement between two companies to join their operations together and partners they are often equal and it results in formation of a new company. So merger means that basically multinational companies want to enter from outside but the existing companies have high stakes in the local market. They are not ready to give up their entire entity in the local market. Sometimes it happens that there are already existing companies in the same market, two multinational companies exist and they merge together to achieve more strategic objectives. For example, recently you must have heard about the merger of Varit and Mobileink and now that company is called Jazz Varit. It has become an entirely new company with a new name and a new brand and although keeping some features of the old brand as well but the company is a new one. So that is merger between two equal partners. They merge together to form a new organization, a new company and partners are often equal. Now acquisition is a little bit different from mergers and acquisition occurs when one company buys another company with the interest of controlling the activities of the combined operations. So in acquisition what happens is that a larger stronger multinational wants to enter the local market from outside and acquires a small local firm which means it buys the entire organization and it buys the entire organization with the interest of controlling the activities of the combined operations. So when the merging firm, the acquiring firm, it acquires a company, it takes the entire control of that whereas in merger they are equal partners, they take control together whereas the acquiring firm takes the control of the company which is being acquired. In merger two companies form together to make a third new company whereas in acquisition the acquiring company keeps its legal entity and integrates a new company into its activities. So in acquisition a smaller firm, usually a weaker firm from the local market is acquired and becomes a part of the acquiring company. You must have heard the acquisition of Polka by Walls which was a subsidiary of Unilever. So when Walls took over Polka, Polka stopped operating whereas Walls did not lose its name or its entity, it was then called Walls in Pakistan as well whereas you may remember that Polka was the main ice cream seller in Pakistan but when Walls came then Polka, there was no Polka at all. So it completely wiped off the smaller firm. So that is an example of acquisition. You can see in the slide that in merger company A and company B they form together to make a new company C and because we are concerned with human resource management in the international context, we would be concerned when we are talking about mergers, there would be intra merger HR challenges, how the two companies come together, how do they form the HR strategies by working together and on the other hand you can see that in acquisition company A and company B they come together and company A buys company B and B is then no more. The company A is the acquiring firm which will remain existent and B will lose its entity and in that we will have intra acquisition HR challenges. Both of them are taken almost in the same way therefore in the next topics we are going to talk about mergers and acquisitions, M and A's. We will call mergers and acquisitions with the acronym of M and A's. So that was the definition of merger and acquisition and how do they differ from each other.