Cross Border Transactions

7/27/2019 Cross Border Transactions

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CROSS BORDER TRANSACTION



CROSS BORDER TRANSACTIONS

This is a very broad topic and can involve almost anbusiness arrangement involving parties in different countries.

“ Cross-border Transactions represent significantopportunities for economic gain and increased share holder or

investor value. Such gains are frequently enhanced by cost savingsfrom rationalizing operations, administration, investment and other areas.”

{ Transaction: An agreement between a buyer and a seller toexchange an asset for payment.}



CROSS BORDER TRANSACTIONS (CONTINUED)

My Presentation will address the following

categories of transactions:

- Cross Border Mergers and Acquisitions

- Cross Border Supply Agreements

- Cross Border Distribution Agreements

- International Joint Ventures

- International licensing

- International Franchising




Cross Border Mergers and Acquisitions- Includes situations in which a company (Company A) in one

country buys a company (Company B) in another country or combines with Company B

- Also includes Company A buying an interest in Company B of

less than 100%- The acquisition of an interest of less than 50% is frequently

part of a larger relationship, for example, a joint venture

Cross Border Supply Agreements-A product made in one country is a component in a final

product made in another country- For example, an engine made in Japan may be incorporated in an

automobile finally assembled in the United States




Cross Border Distribution Agreements- A product manufactured in one country by Company A isdistributed in another country by Company B

- For example, many automobiles are distributed by unrelated distributors incountries other than the country in which they were made.

Joint Ventures- A very broad term which may include one or more of the following:

the acquisition of an interest by Company A in Company B, a component made byCompany A being included in a final product made by Company B or a productmade by Company A being distributed by Company B in another country

- A characteristic of Joint Ventures is that Company A and CompanyB are carrying out some business together over a period of time.



CROSS BORDER M&A

Different Types of M&A

The M&A process itself is a multifaceted which depends upon thetype of merging companies.

- A horizontal merger is usually between two companies in the samebu

siness sector. The example of horizontal merger would be if ahealth cares system buys another health care system. This meansthat synergy can obtained through many forms including such as;increased market share, cost savings and exploring new marketopportunities

- A vertical merger represents the buying of supplier of a business. Inthe same example as above if a health care system buys theambulance services from their service suppliers is an example of vertical buying. The vertical buying is aimed at reducing overheadcost of operations and economy of scale.

. - Conglomerate M&A is the third form of M&A process which dealsthe merger between two irrelevant companies. The example of conglomerate M&A with relevance to above scenario would be if health care system buys a restaurant chain. The objective may bediversification of capital investment



SUPPLY CHAIN AGREEMENTS

-- We will look especially at two of the relationships indicated on The

Supply Chain diagram below, which are the contractual arrangements

between the Component Manufacturer and the Product Manufacturer

and between the Product Manufacturer and the Distributors:

Raw Materials

Component

Manufacturer

Technology

And IP

PRODUCT

MANUFACTURER(PLANT, INVENTORY,

SHIPPING)

Sales

Reps/Agents

Retailers

and Dealers

Distributors

including Wholesalers



Independent

Distributor

Affiliated

Distributor

Affiliated

Distributor’s

Retail Dealers

Independent

Distributor’s

Retail Dealers

Manufacturer

Retail Customers

International Distribution Agreements



INTERNATIONAL JOINT VENTURE

Types of Joint Ventures

Jointly controlled operation Venture uses own assets, incurs own expenses and liabilities

Each venture provides expertise to manufacture product Different parties carry out different responsibilities

Jointly controlled assets Recognizes income from sale of output

Oil, gas, mineral extraction industry Each company shares in ownership of assets, economic benefit of extracting

oil Jointly controlled entities

Establishment of corporation or partnership where each entity hasinterest

Maintains own accounting records

Each entity contributes cash or resources



Combining Resources—The Marriage

……. What do you bring to the equation

JV Partner II

Technology

Financial Resources

JV Partner I

Mfg

Sales

Branding Mkt Access



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LISTENING!

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Cross Border Transactions