- Cross-Border Mergers and Acquisitions: The Role of Private Equity Firms
- Number of pages
- Amsterdam/Rotterdam: Tinbergen Institute/Duisenberg school of finance
- Tinbergen Institute Discussion Papers/DSF research papers
- Volume | Edition (Serie)
- TI 12-031/2/DSF32
- Document type
- Working paper
- Faculty of Economics and Business (FEB)
- Amsterdam Business School Research Institute (ABS-RI)
We study the role of private equity firms in cross-border mergers and acquisitions. We find that private equity-owned firms are more likely to become targets in crossborder M&A transactions. This effect is particularly strong in transactions where the target or its shareholders actively reach out for an acquirer. On average, cross-border deals with private equity-involvement are not associated with higher announcement returns. However, announcement returns are higher if the acquirer is owned by a private equity firm and the target is from a country with poor corporate governance. We provide evidence indicating that the international networks and connections that result from prior cross-border deals can explain why private equity firms create value in such deals. Our findings suggest that private equity firms can help to reduce information asymmetries in certain cross-border M&A deals. We perform several tests to address possible endogeneity concerns.
- This draft: March 06, 2012
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