Cross-Border

Mergers
and Acquisitions

 The globalization of business over

the past decade has spawned a
search for competitive advantage
that is worldwide in scale.
Companies have followed their
customers who are going global
themselves as they respond to
the pressures of obtaining scale
in a rapidly consolidating global
economy.

 In combination with other

trends, such as increased
deregulation, privatization, and
corporate restructuring,
globalization has spurred an
unprecedented surge in crossborder merger and acquisition
activity.

 Cross border M & As have

become a fundamental
characteristic of the
global business landscape.

 Even mergers of companies with

headquarters in the same
country while usually not
counted as cross-border are
very much of this type. After all,
when Boeing acquires McDonnell
Douglas, the two American
companies must integrate
operations in dozens of countries
around the world.

 This is just as true for other

supposedly single country
mergers, such as the $27 billion
dollar merger of Swiss drug
makers Sandoz and Ciba- eigy
(now Novartis).

 Hence, understanding the

problems and opportunities of
cross- order mergers and
acquisitions is an essential
element in understanding most
M&As, and indeed in
understanding the nature of
global strategy.

 In spite of the huge volume of

activity in the cross-border M&A
marketplace, an inescapable fact
emerges when these deals are
examined more closely the
majority of cross border M&As
are not successful.

 For example, economists David J.

Ravenscraft and William F. Long
found that most of the 89
acquisitions of American companies
by foreign buyers between 1977
and 1990 they studied did not
improve operational performance
one year after the acquisition.
Numerous anecdotal accounts
corroborate these results.

 What makes them particularly

troublesome in cross-border
deals are the inherently greater
challenges of melding country
cultures, communicating across
long distances, dealing with
misunderstandings arising from
different business norms, and
even fundamental differences in
management style.

 Why are cross-border mergers

and acquisitions so difficult to
implement? Consider all that
must go right in any (samecountry) acquisition:

 The two companies must reach

agreement on which products and
services will be offered, which
facility or group will have primary
responsibility for making this
happen, who will be in charge of
each of these facilities or
groups, where will the expected
cost savings come from,

 what will the division of labor

look like in the executive suite,
what timetable to follow that will
best generate the potential
synergies of the deal, and myriad
other issues that are complex,
detailed, and immediate.

 On top of all this the merging

companies must continue to
compete and serve their
customers in a competitive
marketplace.

 Why are cross-border mergers

and acquisitions so difficult to
implement?
Consider all that must go right in
any (same-country) acquisition:

 The two companies must reach

agreement on which products and
services will be offered, which
facility or group will have primary
responsibility for making this
happen, who will be in charge of
each of these facilities or
groups,

 where will the expected cost

savings come from, what will the
division of labor look like in the
executive suite, what timetable
to follow that will best generate
the potential synergies of the
deal, and myriad other issues
that are complex, detailed, and
immediate.

 On top of all this the merging

companies must continue to
compete and serve their
customers in a competitive
marketplace. Now, take all these
challenges, and add a completely
new set of problems that arise
from the fundamental
differences that exist across
countries.

 Consider, for example, for all the

similarities that a global
imperative places on companies,
the very real differences in how
business is conducted in, say,
Europe, Japan, and the United
States.

 These differences involve

corporate governance, the power
of rank and file employees, worker
job security, regulatory
environments, customer
expectations, and country culture
all representing additional layers
of complexity that executives
engaged in cross-border M&As
must manage.

 Is it any wonder that cross

border mergers are potential
minefields that require the
utmost care?

What is the strategic

logic for the Acquisition
The keys to establishing an
effective strategic logic lie in
answering questions such as:

How will this merger create

value, and when will this value be
realized?
Why are we a better parent for
this company than someone else?

 Can this merger pass the

better-off test will we be
able to create more value (by
being more competitive, having a
stronger cost structure, gaining
additional competencies that we
can leverage in new ways, etc.)
after the deal?

 These are difficult questions

that require careful, objective,
preacquisition analysis. The
tendency for companies in the
heat of battle to overstate the
real strategic benefits of a deal
is a definite problem that must
be guarded against.

 Pressures that arise from the

desire to close a deal quickly
before rival bidders appear,
cultural and sometimes language
barriers that create uncertainty,
and the often emotionally
charged atmosphere surrounding
negotiations, work against this
requirement of objectivity.

 The best solution in this case is

to enter the M&A mode with a
carefully developed framework
that addresses the key
questions, and to stick to that
framework in evaluating a
potential acquisition candidate
even when the seemingly
inevitable strains arise.

 The highest potential

crossborder M&As tend to be
between firms that share similar
or complementary operations in
such key areas as production and
marketing.

 When two companies share

similar core businesses there are
often opportunities for
economies of scale at various
stages of the value chain (e.g.,
R&D, manufacturing, sales and
marketing, distribution, etc.)

 The strategic logic of combining

complementary assets can also be
compelling.

 These assets, which extend to

complementary competencies in
technology and know-how, offer
great opportunities for
companies to create value in the
right circumstances Mergers
create uncertainty, and people
often experience considerable
stress during this time.

 There is a real danger that some

of the best people in a company
will leave as a result of the
merger after all, it is usually
the best people that have the
most attractive outside
opportunities and inattention to
their personal concerns may be
costly.

 Studies indicate that the root

cause of employee problems are
feelings of mistrust and stress,
perceived restrictions in career
plans, and attacks on established
cultural traditions within the
acquired company,

 each of which is exacerbated by

the fundamental differences
that exist between both merging
companies and the countries in
which they are based. And these
problems do not go away if left
untreated.

 Differences among management

and workers can sometimes spiral
into broader community and
political problems.

 Given the importance of

integration to acquisition
success, how can companies best
manage this process?
There are several important
considerations.

 Understand that most of the

value creation in an acquisition
occurs after the deal is done. For
all the synergies and benefits
that are projected to accrue
from an acquisition, none can be
realized without substantial
effort during the integration
process.

 Plan for integration before doing

the deal. There are many reasons
why companies do not do this
such as time constraints,
insufficient information, lack of
awareness of how critical
integration really is but the
alternative is to essentially guess
at the sources of value creation.

 Develop a checklist of key

integration issues, assign
personal responsibility and a
timetable for dealing with these
issues, and set targets that will
enable the value creation needed
to make the deal work.

 Although integration is a process

that cannot be completed in a
few days, this analysis should
yield a blueprint for how to
create value from the acquisition.

 Work the details. Some of the

confusion and complexity of
cross-border mergers can be
mitigated by ensuring that
executives in an acquiring
company learn about differences
in accounting standards, labor
laws, environmental regulations,

 and norms and regulations

governing how business is
conducted in the country of the
acquired firm early in the
process.

 Develop a clear communication

plan throughout the entire
process. The prospective melding
of different country cultures in a
cross-border deal can easily
compound the uncertainty
employees experience in any
merger, and must be addressed
in a proactive manner.

 In sum, there are two

fundamental imperatives that
must be underscored in any
discussion of cross-border
mergers and acquisitions.

 First, companies engage in a

merger or acquisition to create
value, and that value creation
comes about through a
combination of synergy realization
to cut costs and competitive
strategy repositioning to increase
revenues and growth.

 And second, both the synergy

realization and competitive
strategy goals cannot be
achieved without significant
attention to the challenge of
acquisition integration.

 If cross-border M&A strategies

are to fulfill their potential, and
justify the premium companies
typically pay to 6 engage in them,
managers will need to fully
understand, and embrace, these
two imperatives.

 The India story has seen a

profound shift in gear and
direction during 2006. While in
recent years most media
references to Indias growth
have focused on the subcontinent as a destination for
outsourcing and investment,

 this year has seen the arrival of

India as a shaping force evident
in the powerful new trend
towards overseas acquisitions by
Indian companies.

 Indian crossborder mergers and

acquisitions (M&A) is the search
for top-line revenue growth
through new capabilities and
assets, product diversification
and market entry.

 This trend is not driven purely by

opportunistic factors: Indian
companies are in many cases
motivated to look abroad in
response to newly competitive,
complex or risky domestic
markets or to find capabilities
and assets that are lacking in
India.

 The steep increase in the number

of major cross-border
transactions in recent years from 40 in 2002 to more than
170 in 2006 - has been
facilitated by the relaxation of
regulations on overseas capital
movements as well as a more
supportive political and economic
environment,

 including deeper currency

reserves, and easier access to
debt financing, both at home and
from international banks.

 This M&A trend is a key factor

helping Indian companies to
emerge on the global stage. Six
Indian companies feature in the
Fortune Global 500 list of the
biggest companies in the world.

 These are Indian Oil, Reliance

Industries, Bharat Petroleum,
Hindustan Petroleum, Oil &
Natural Gas, and the State Bank
of India. Based on current
growth and M&A trends, we
would expect this number

 After the Tata-Corus and

Vodafone-Hutch mega-deals,
conservative estimates by Indian
analysts have pegged mergers
and acquisitions (M&As),
including outbound and inbound
deals involving Indian firms, to
reach $100 billion in 2007.

 Another recent study by the

Institute of International
Finance, a Washington-based
global association of financial
institutions, has predicted that
the desire of India Inc to operate
in foreign lands will lead to a
threefold rise in direct
investment flows out of the nation
in 2007.

 The figure might appear meager

weighed against the frequent
investment announcements of
hundreds of millions of dollars
abroad by Indian majors, because
of big foreign financing
components or debts.

 In 2006-07, India has already

seen mergers worth more than
$40 billion that include Tata
Steel's acquisition of AngloDutch steel maker Corus ($12.2
billion), Hindalco's buyout of
Novelis ($6 billion),

 Suzlon's bid for Germany's

REpower ($1.3 billion, a figure
likely to go up because of a
higher rival bid), besides
Vodafone's acquisition of a
majority in Hutchison Essar Ltd
($18.8 billion).

 Others could include Reliance

Industries' interest in the
plastic division of General
Electric a deal that could top $5
billion. Comparable figures are
being quoted for Ranbaxy and a
private-equity firm's interest in
German pharmaceuticals major
Merck.

 The main factors driving the

M&As among Indian companies
are surplus funds, globally
competitive business practices
and a favorable regulatory
environment, besides higher
margins, revenue, volumes and
growth prospects, says the
Assocham report.

Why M&A?

Opportunity for growth

Need for faster growth
Access to capital and brand
Gaining complementary strengths
Acquire new customers

 Need to enhance skill sets

Expand into new areas
Widen the portfolio of addressable
market
Meet end-to-end solution Needs

Acquisitions by major
Indian Players
Indian Company Company/Plant
acquired/Set-up abroad Located in
Size of the deal ($ mn) Amtek
Auto Smith Jones Inc. US 20
Amtek Auto GWK Group UK 37
Bharat Forge Carl Dan Peddinghaus
GmBH* Germany
116#(euro)

 Sundaram Fasteners Dana Spicer

Europe* (Forging unit) UK 2.6
Sundram Fasteners Sundram
Fasteners (Zhejiang)** China 5
G. G. Automotive Gears Name not
disclosed. US company that
manufactures high precision
custom gears and planetary
gears. US 110

Conclusion
Until the 1990s, not many Indian
companies had contemplated
spreading their wings abroad. An
Indian corporate or group
company acquiring a business in
Europe or the U.K. seemed
possible only in the realm of
fantasy.

 The reasons why overseas

acquisitions are becoming more
common are many. The reform
era and the march of
globalization have obviously made
the environment more conducive.
Globalization forever changed
the rules of the game.

 Indian entrepreneurs had gained

confidence to compete with wellestablished multinationals from
abroad in the domestic market
place.

 It was only a matter of time

before some of them would shift
their focus beyond the Indian
shores, not just in selling their
products but in setting up
manufacturing facilities as well.

 A whole range of companies in

fields such as pharmaceuticals,
automobile ancillaries, IT,
banking and steel have ventured
abroad. In general, the factors
favouring foreign forays in most
cases are the availability of
affordable human resources,
willing to adapt to the global
scenario.

 The contribution of economic

reform at home to the outward
focus of companies can hardly be
overstated. For instance, the
rupee's exchange rate is market
determined and all current
account transactions have been
freed from controls.

 Indian companies enjoy

substantial freedom to invest
abroad even though there is no
full convertibility of the rupee as
yet. Indian businessmen too have,
albeit more slowly than those in
the West, chosen to invest
abroad through acquisitions.

 The good news is that what

started as a trickle in the 1990s,
has been growing in size. Today
outward fund flows from India
almost match those coming in
from abroad.

C. Identified obstacles to
cross-border mergers
I. Legal Barriers
a) Execution risks

 1. Cross-border takeover bids

are complex transactions that
may involve the handling of a
significant number of legal
entities, listed or not, and which
are often governed by local rules
(company law, market regulations,
self regulations).

 Not only a foreign bidder might

be disadvantaged or impeded by
a potential lack of information,
but also some legal
incompatibilities might appear in
the merger process resulting in a
deadlock, even though the bid
would be friendly.

 This legal uncertainty may

constitute a significant execution
risk and act as a barrier to
cross-border consolidation

 2. The financial sectors of some

Member States include
institutions with complex legal
setup resulting in opaque decision
making processes. An institution
based in another Member State
might only have a partial
understanding of all the
parameters at stake,

 some of them not formalized.

Such a situation might constitute
a significant failure risk, as a
potential bidder might not have a
clear understanding of who might
approve or reject a merger or
acquisition proposal.

 3. In some cases, legal

structures are not only complex
but also prevent, de jure or de
facto, some institutions to be
taken over or even merge (in the
context of a friendly bid) with
institutions of a different type.

 Such restrictions are not

specific to cross-border
mergers, but could provide part
of the explanation of the low
level of cross-border M&As,

 since consolidation is possible

within a group of similar
institutions (at a domestic level)
whereas it is not possible with
other types of institutions
(which makes any cross-border
merger almost impossible).

 4. In some Member States, the

privatization of financial institutions
has sometimes been accompanied by
specific legal measures aimed at
capping the total participation of
non-resident shareholders in those
companies or imposing prior
agreement from the Administration
(i.e. golden shares).

 Some of such measures were

clearly discriminatory against
foreign institutions, when it came
to consolidation.

 5. In some Member States,

company law allows the company
boards to set up defence
mechanisms, such as double
voting rights and poison pills, to
prevent any hostile bids.

 Such asymmetries in company law

might distort the level playing
field within the EU, and protect
national markets, sometimes to
the benefits of participants in
these markets.

 6. Even if an acquisition is
successful, there may exist
impediments to effective
control, i.e. there may be a risk
that the acquiring company does
not acquire proportionate
influence in the decision making
process within the acquired
company while being exposed to
disproportionate financial risks.

 This can be explained notably by

the existence of special voting
rights, ineffective proxy voting
or use of the Administrative
office by a foreign acquirer. Also
barriers (or restrictions) to sell
shares could hamper the process.

 7. Differences in national
reporting schemes, notably as
regards accounting systems, may
result in difficulties to assess
the financial situation of a
potential target.

b) One-off costs
8. The national laws of some
countries might include
restrictions on the type of
offers that can be executed (i.e.
cash only vs. exchange of
shares).

 Even though such measures are

not in themselves discriminatory
to cross-border mergers, they
might constitute a barrier to
cross-border consolidation, given
that the different features of
such mergers (notably in terms
of size) could call for a specific
type of offer.

c) Ongoing costs
9. Differences in employment
legislation across the EU may
also create barriers for efficient
and flexible (re)organization.

 In particular, the procedures to

move staff within a pan-European
group remain very complex
(furthermore in some cases,
prudential rules impose
constraints on the location of
staff.

 Those differences may also

result in higher legal costs to
deal with the different legal
systems, as well as complex
processes and different
timelines when trying to
introduce changes on a crossborder basis.

 10. The different accounting

systems across the EU have also
required companies to set up
adapted IT, specific personnel
and reporting systems.

 This limits the scope of possible

cost synergies when two
institutions merge across the
border, where as such synergies
do exist when two institutions.

 11. The consumer protection rules

are very different from one
Member State to another. This
heterogeneity translates into the
necessity of country-customized
financial products compliant with
those rules, and therefore also
specific IT systems that handle
those products and consumer
relationship.

 For instance, this has been

evidenced in the mortgage credit
sector in the report recently
published by the mortgage credit
forum group set up by the
Commission.

 Furthermore, those different

rules are often based on the
general good provisions and
consequently potential abuses
aimed at protecting the national
markets are difficult to
challenge in court.

 12. Differences in national

implementations of the Directive
on data protection may also
interfere with an optimal
organization of businesses within
merged companies. Indeed, it can
have a strong impact on IT
systems and limit back-office
rationalization.

 13. More generally, differences

of approaches in private law,
sometimes explained by
historical or cultural factors,
may impose a country-by-country
approach for some products or
services (especially in the
insurance sector), with the same
results as differences in
consumer protection rules.

 Those differences include

notably liability and bankruptcy
rules, with the implied
difficulties of enforcing crossborder collateral arrangements,
as well as differences in legal
rules for securities.

II. Tax barriers

a) Execution risks
14. As mentioned earlier,
mergers and acquisitions are
complex processes.

 Despite some harmonized rules,

taxation issues are mainly dealt
with in national rules, and are not
always fully clear or exhaustive
to ascertain the tax impact of a
cross-border merger or
acquisition.

 This uncertainty on tax

arrangements sometimes
requires seeking for special
agreements or arrangements
from the tax authorities on an ad
hoc basis, whereas in the case of
a domestic deal the process is
much more deterministic.

 15. The uncertainty on VAT

regime applicable to financial
products and services may put at
risk the business model or
envisaged synergies. The EU's
VAT legislation in this area is
badly in need of modernization
and because of its inadequacies,
there is an increasing tendency
to resort to litigation.

 The outcome can often be

uncertain and as a result tax
implications may place a question
mark over otherwise sound
business strategies.

 16. In recent years, the number

of significant ECJ cases on VAT
and financial services has
increased steadily.

 Individual judgment may indeed

clarify the law in particular
circumstances but often at the
cost of consequences which may
not always be compatible with
overall Community policy
objectives.

Ongoing costs
17. The issue of transfer pricing
is a complex one for a group
operating in several countries.

 As was evidenced in the

Commissions Communication
Towards an Internal Market
without tax obstacles - A
strategy for providing companies
with a consolidated corporate
tax base for their EU-wide.

 18. A group operating across

several Member States may wish
to centralize support functions
to increase operating efficiency.

 But in many cases the result will

include creating a VAT penalty on
the inter group supply of
services (e.g. legal services or
other back technical operations)
to another Member State.

 19. Given that in the financial

services sector VAT is at best
only partially recoverable, this
represents significant additional
costs that penalized cost
synergies to expect from a
crossborder merger when
compared to a national merger.

 This tax penalty on cross-border

shared service operations is in
addition to the general bias
towards vertical integration
which is widely perceived as a
barrier to efficiency in the
existing VAT provisions.

 20. Specific domestic tax breaks

may favour specific, nonharmonized products or services,
with the result that every
institution has to provide this
service or product if it wants to
remain competitive.

 In such a situation, a merger

between two entities located in
that domestic market may yield
synergies of scale, whereas it will
be more difficult to exploit
comparable synergies for a
foreign institution taking over a
domestic one, while not being
entitled to the tax break in their
home state.

 21. In some cases, there may be

discriminatory tax treatments
for foreign products or services,
i.e. products or services provided
from a Member State different
from the one where it is sold.

 22. Therefore, a cross-border

group will be disadvantaged when
trying to centralize the
industrial functions (e.g. asset
management functions) over a
domestic group since the latter
may keep all its value chain within
the country and still benefit
from synergies.

 23. A cross-border merger may

highlight gaps or imperfections in
the regulatory framework which
may make regulators feel
uncertain how to proceed, leading
to delay, the imposition of
specific measures or a veto of
the proposed merger.

 24. In the banking sector, for

example, the emergence of large
cross-border groups might raise
local supervisors concerns
regarding financial stability (e.g.
the ongoing discussions on
deposit guarantee schemes).

 In other sectors such as

exchanges which had
traditionally operated within one
national market, regulators may
be unclear how to operate in a
cross-border context.

 25. The complexity of the

numerous supervisory approval
processes in the case of a crossborder merger can also pose a
risk to the outcome of the
transaction as some delays must
be respected and adds to the
overall uncertainty.

 In particular, in the case of a

merger between two parent
companies with subsidiaries in
different countries, indirect
change of control regulations
may require that all the national
supervisors of all the
subsidiaries must approve the
merger.

 26. Despite a common regulatory

framework, there might be
significant divergences in
supervisory practices at the level
of institutions.

 Such divergences might be

explained by optionally in the
harmonized rules, including
provisions taken at national level
that exceed the harmonized
provisions (super equivalent
measures), or lack of coherence
in enforcement of common rules.

 27. The consequence is a limit on

homogeneous approaches, and
therefore synergies, of risk
control and risk management
within a cross-border group.

IV. Economic barriers

a) Execution risks
b) One-off costs

 28. The fragmentation of the

European equity markets may
impose additional transaction
cost on a cross-border merger.
For instance, the exchange of
share mechanism can be complex,
and more expensive, when the
two entities involved are listed
on different stock exchanges.

 The additional costs might also

influence the bidder on the type
of deals (i.e. cash vs. exchange of
shares).

c) Ongoing costs
29. Independently of the legal
frameworks or tax incentives.

 30. The absence of critical size in

some market segments (e.g.
investment banking) may incite
institutions to enter into a niche
strategy, where the advantages of
cross-border mergers that create
large players is less evident from
an economic point of view.

 31. Indeed, not only it would be

difficult to find synergies
between two niche players, but
also absolute size would not
necessarily be an advantage if an
institution wants to maintain its
competitive advantage in its
niche market.

 32. Domestic mergers can

contribute to increase market
power, and therefore increased
profitability even without any
cost synergies (i.e. raising the
income while maintaining the
costs at a constant level).

 33. Since most of the retail

markets are still organized on a
national basis, cross-border
mergers yield very few, if any,
increased market power.

 34. Differences in economic

cycles across the different
Member States may also play a
role, in that the economic
environment has a strong effect
on bank profitability.

V. Attitudinal barriers
a) Execution risks
35. Openly or not, some Member
States may promote a national
industrial policy, aiming at the
creation of national champions.

 Among possible justifications,

some may argue that such a
policy may ensure adequate
financing of the national
economy. Political considerations
may also play a role with recently
privatized companies or
institutions that have received
public money.

 This political interference may

block a cross-border merger,
even though such this
transaction is compatible with
the existing rules. Such
interference might not require
formal powers or rules to
materialize.

 Indeed, as evidenced in the

previous sections, there are many
obstacles to overcome to carry
through a cross-border merger
that it is realistic to think that
no cross-border merger can be
achieved if there is a strong
political opposition.

 In addition, such a policy may

lead to tolerance of high levels
of concentration at a domestic
level, allowing (or even
encouraging) domestic
consolidation over cross-border
consolidation and making it even
more difficult to accept a
foreign takeover of a national
institution with a significant
market share.

 36. Employees reluctance within

the target company of a crossborder deal might also pose a
threat to the successful outcome
of the transaction. Indeed,
employees may not accept to be
managed from another country.

 A public opposition to the

project may influence analysts
assessment. Also employees may
play a role if they have a
participation in the company.

 37. Cross-border mergers may

imply a change in the place of
quotation, or even in the
currency of quotation.

 Shareholders acceptance of
quotation changes may be limited,
even all risks or tax impacts are
eliminated. Indeed, the place of
quotation may have an important
symbolic value.

 38. Given that cross-border

mergers are complex and need to
overcome a number of execution
risks (as evidenced in this
document), there might be an
impact on shareholders and
analysts apprehension of failure
risk when it comes to crossborder mergers.

 b) One-off costs
c) Ongoing costs

 39. Interference with political

considerations may also have
consequences in the structures
put in place after a cross-border
merger.

 Such political concessions (e.g.

guarantees of level of
employment, no headquarter
moves, protection of the local
brand) may help in getting the
merger through the different
obstacles,

 but constrain the resulting

cross-border entity in realizing
the full potential of the merger
as options may be severely
limited.

 40. Consumers may mistrust

foreign entities, meaning that all
parameters being equal, a local
incumbent may have an advantage
over a competitor identified as
foreign.

 This explains why foreign

institutions often prefer to keep
a local brand, even though it
might impede synergies across
certain functions (e.g. marketing)
or slow down the integration
process (transition from one
brand to another over a long
period of time).

Summary
I. Legal Barriers
II. Tax barriers
III. Implications of supervisory
rules and requirements
IV. Economic barriers
V. Attitudinal barriers

a) Execution risks
1. Legal uncertainty
2. Opaque decision making
processes
3. Legal structures

 4. Limits or controls on foreign

participations
5. Defence mechanisms
6. Impediments to effective
control
7. Difficulties to assess the
financial situation

 14. Uncertainty on tax

arrangements
15. Uncertainty on VAT regime
23. Concerns regarding financial
stability
24. Misuse of supervisory powers
25. Supervisory approval
processes

 35. Political interference

36. Employees reluctance
37. Shareholders acceptance of
quotation changes
38. Shareholders and analysts
apprehension of failure risk

b) One-off costs
8. Restriction on offers
16. Exit tax on capital gains
28. Fragmentation of the
European capital markets

c) Ongoing costs
9. Employment legislation
10. Accounting systems
11. Divergent consumer
protection rules

12. Data protection

13. Differences in private law
17. Transfer pricing
18. Inter-group VAT
19. No homogeneous loss
compensation

 20. Specific domestic tax breaks

21. Discriminatory tax
treatments
22. Taxation on dividends
26. Divergences in supervisory
practices
27. Multiple reporting
requirements

 29. Different product mixes

30. Non-overlapping fixed costs
31. Lack of middle-size
institutions
32. Absence of critical size
33. Market power

 34. Differences in economic

cycles
39. Political concessions
40. Consumer mistrust in foreign
Entities