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The dynamic interaction of a continuous integration of global product markets, progressive technological developments, and heightened pressure from international capital markets vastly contributes to an increasing worldwide consolidation and concentration of industries.^1 In this rapidly evolving global competitive environment, German companies are faced with positioning themselves by expanding internationally in order to reallocate their resources, penetrate different regions, and to access new technology.^2 As an efficient and fast strategic alternative to organic growth, geographic diversification through cross-border mergers and acquisitions (“M&A”) represents the predominant means for German companies to strengthen their global market position by seeking lucrative international growth opportunities.^3

This chapter provides the conceptual framework for the study. It defines and categorizes mergers and acquisitions, gives the perspective for measuring success of acquisitions (Section 2.2), discusses theories explaining the occurrence of merger and acquisition activity (Section 2.3), summarizes the global and German merger activity in the period 1990 to 2004 (Section 2.4), and describes the phases of a standardized acquisition process (Section 2.5). The theoretical basics of Sections 2.3 and 2.5 are laid out first without a distinction of the geographical focus of the transaction, before specific considerations for cross-border acquisitions are addressed.

The purpose of this chapter is to provide an overview of specific considerations for the transaction structuring and management phase when acquiring a U.S. target company. As mentioned earlier, the main concerns and risks for a foreign acquirer for the structure and management of a cross-border transaction result from the impact of the local institutional peculiarities of the target’s country. This presentation of U.S. specific considerations begins with laying out the possible structures for the U.S. transaction, which is focused on the implications of the U.S. securities laws applicable to the acquisition of a public target company (Section 3.2). Following is a discussion about conducting a due diligence for a U.S. target, with an emphasis on the U.S. accounting and legal environment (Section 3.3). Also of particular interest for a foreign acquirer are tax consequences of alternative acquisition structures (Section 3.4), various aspects for the valuation (Section 3.5), and the principal documentation (Section 3.6) of the U.S. transaction. After a brief description of the U.S. regulatory framework of antitrust laws (Section 3.7), a summary of the main implications for the acquisition structuring and management phase concludes this chapter.

The purpose of this chapter is to provide a concise overview of the results of previous research on the success of cross-border mergers and acquisitions. The review of prior studies focuses on the methodologies used for measuring success (Section 4.3) and the accumulated evidence (i) proving if and to what extent transactions were successful (Section 4.4) and (ii) suggesting which characteristics of the acquiring and target companies and the transaction structures make it more likely that a particular transaction will be successful (Section 4.5). A condensing of the empirical results into testable hypotheses with regard to the goal of this study to analyze the success and its determinants of U.S. acquisitions by German companies will conclude this review (Section 4.6).

The main focus for the analysis of the success of transactions and its determinants for German cross-border acquisitions of U.S. targets is the perspective of the shareholders of the acquiring company. Accordingly, transaction success is measured using the event study methodology. However, as Bruner (2002) notes, the “task must be to look for patterns of confirmation across approaches and studies much like one sees an image in a mosaic of stones.”^1 In order to obtain a qualitative assessment of transaction success the event study is complemented by a survey that is designed to yield additional insights from a managerial perspective. Accordingly, those executives of German companies that pursued an acquisition in the United States during the period 1990 to 2004 were asked to provide their evaluation of transaction success.

In light of the position of the United States as the single most important target country for cross-border mergers and acquisitions by German companies during the fifth merger wave, the goals of this study were to (i) detect special aspects that impact the structure and management of a U.S. cross-border transaction, (ii) evaluate from the perspective of the acquirer’s shareholders and management how German companies succeeded in the U.S. environment, and (iii) identify potential determinants of cross-border transaction success. This summary condenses the conclusions and implications with regard to these goals discussed at the end of Chapters 3 and 5.