CHAPTER 11
Cross-Border Valuation Effects in Developed and Emerging Markets
INTRODUCTION
In early 2010, after four months of persistent wooing, American Kraft Foods finally succeeded in its bid to buy British candy maker giant Cadbury. The final price of $19.5 billion, 14 percent over the initial bid, certainly sweetened the deal for the British firm. The stock market reacted favorably to the announcement, and Kraft shares rose by 1.6 percent while Cadbury closed up 1 percent. The combined companies would be the world leader in chocolate and sweets. For Kraft, the deal would help boost overall sales and profit growth rate and greatly bolster its presence in international markets.
This marriage of sorts is just one of many examples of a cross-border acquisition transaction between two firms located in different nations. Cross-border mergers and acquisitions (M&As) generally attract interest in the business community and often arouse national sentiments. When Belgian brewing company Inbev acquired Anheuser-Busch, a prominent American beer company, even President Barack Obama commented. An article entitled “Love Me, Love Me Not” (2008, pp. 36–38) quotes him as saying that “no law barred shareholders from selling Anheuser-Busch to a foreign firm, but that such a deal would be ‘a shame.’” The more recent trend of emerging market firm acquisitions in developed countries has drawn even greater attention. ...
