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Equity Joint Venture, M&A, & Greenfield Investment in Context of Latin America

Introduction3

Discussion4

Equity Joint Venture4

Merger & Acquisition5

Greenfield Investment5

Advantages & Disadvantages of Equity Joint Venture6

Advantages & Disadvantages of Mergers & Acquisitions7

Advantages & Disadvantages of Greenfield Investment8

Similarities & Dissimilarities between EJV, M&A, & GI11

Conclusion14

References15

Equity Joint Venture, M&A, & Greenfield Investments in Context of Latin America

Introduction

The current paper examines the comparison as well as contrast between three key modes of business expansion in the Latin America: Equity Joint Venture, Mergers & Acquisitions, and Greenfield Investment. In order to determine this we highlighted the advantages as well as disadvantages associated with each of three options and determined the similarities as well as dissimilarities among all three alternatives. The analysis reveals that all the three modes of entering into a new market or expanding a business into new market associate some advantages as well disadvantages due to which their suitability of implementation vary from business to business and market to market.

Figure 1: Choice of Entry Mode: A Hierarchical Model

(Source: Ovcina, 2010, n.d. fig.2)



Discussion

Equity Joint Venture

An equity joint venture (EJV) is a contract among two firms for entering into a separate business venture jointly. The business structure of this type of business venture is a separate limited liability corporation, which shields each partner from the obligations. The primary aim of equity joint venture is to diversify the risk, facilitate opportunities for raising capital, reducing barriers for entering, and creating economies of scale while developing a definitive time the joint venture exist. So, an equity joint venture basically comprises of two investors that posses joint operations as well as ownership of LLC and agree to a prescribed format for the participation of foreign investors, management, and risk division (USCBS, 2011, p.1).

As far as Latin America is concern, research indicates that this region demonstrates high involvement in efforts to promote the formation of bi-national as well as multi-national businesses. The joint ventures of Latin America can be considered as a small scale succeeding reproduction of the transnational enterprise. Still, on the grounds of politics and economy, the joint ventures in Latin America are observed by regional enterprises as well as government as a probable new force in the region's external relations. This offers avenues for global actions, enhancement in bargaining power of the region, and decreases the asymmetries with industrialized nations (http://unctc.unctad.org). Thus, it is clearly represented that EJV in context of Latin America is very much recognized and appreciated as a contributing factor of reforming the global economic order.

Merger & Acquisition

A merger is refers to a contract among two firms to combine their operations jointly and form a new legal entity, on the other hand, an acquisition refers to a takeover of one company by another firm with an interest of controlling the activities of the mutual operations. Research indicates that mergers and acquisitions activities in an international context remain sluggish, while M&A activity is expected to increase since firms are expanding domestically and improve their cross border interests (GT, 2013, ...