Determinants of cross-border mergers and acquisitions in the freight and logistics industry of South Africa : a qualitative approach

Abstract

International trade is important in today’s modern, commercial world. International mergers and acquisitions (M&As) in the freight and logistics industry create companies with an international scale and effectively link the world’s capitalist systems more firmly together. Firms are benefitting from expanded market opportunities across national borders; this provides prospects for companies not only to generate substantial revenues, but also for geographical growth and expansion of the business. The fast growing nature of the services sector, especially in developing and emerging economies at an infrastructure, policy and intercontinental level, may indicate important determinants of trade volumes, the distributional effects of trade, overall patterns of economic growth and development as well as Foreign Direct Investment (FDI) inflows. This dissertation examines the development of inorganic growth spurts in the freight and logistics industry through M&As in South Africa. Extensive research has been conducted on FDI and specifically M&As globally, but less research exists on M&As in the services sector, and more specifically on the freight and logistics industry. It was therefore the objective of this study to analyse old and new data on M&As that have been collected in recent years from around 1995 to 2016, to determine what the drivers are that are motivating MNEs to pursue inorganic growth methods rather than organic growth methods. The global freight and logistics industry is a direct beneficiary of globalisation and has been growing at a fast pace, generating high amounts of returns on capital, thereby attracting both strategic and financial investors. It seems these investors are operating on the notion that “bigger is better”, and consequently the world is seeing an upsurge in the number of M&As in this industry. Identifying the drivers behind inorganic growth methods through M&As in the freight and logistics industry of South Africa is firstly done by means of a literature study that firstly examines FDI and M&As in detail, and secondly examines the literature on the services sector and freight and logistics industry in detail. The case study approach was adopted to explore and investigate the theoretical aspects of FDI such as motives for market entry, ownership and location and entry barriers within the context of Multinational Enterprises (MNEs) globally After comparing the results of the three cases with each other, it can be summarised that corporate growth (market share, geographic reach or sales volume/financial growth), economies of scale, synergies, competitive advantage and exploiting an opportunity that arose were the most significant motivations/driving forces behind these MNEs choosing to pursue inorganic growth methods through mergers and acquisitions in the freight and logistics industry