Cross-border acquisitions and restructuring : Multinational enterprises and private equity-firms
Baziki, Selva Bahar ; Norbäck, Pehr Johan ; Persson, Lars LU and Tåg, Joacim LU
(2017)
In European Economic Review
94.
p.166-184
- Abstract
An increasingly large share of cross-border acquisitions are undertaken by private equity-firms (PE-firms) and not by traditional multinational enterprises (MNEs). We propose a model of cross-border acquisitions in which MNEs and PE-firms compete over domestic assets and which incorporates endogenous financial frictions. MNEs’ advantages lie in firm-specific synergies and access to internal capital markets, whereas PE-firms are good at reorganizing target firms. We show that stronger firm-specific synergies, lower restructuring advantages for PE-firms, higher exit costs for PE-firms, better access to internal capital markets, a higher risk premium on lending, higher moral hazard problems, and higher trade costs all favor MNEs over... (More)
An increasingly large share of cross-border acquisitions are undertaken by private equity-firms (PE-firms) and not by traditional multinational enterprises (MNEs). We propose a model of cross-border acquisitions in which MNEs and PE-firms compete over domestic assets and which incorporates endogenous financial frictions. MNEs’ advantages lie in firm-specific synergies and access to internal capital markets, whereas PE-firms are good at reorganizing target firms. We show that stronger firm-specific synergies, lower restructuring advantages for PE-firms, higher exit costs for PE-firms, better access to internal capital markets, a higher risk premium on lending, higher moral hazard problems, and higher trade costs all favor MNEs over PE-firms. We also present cross-country correlations that are consistent with these predictions.
(Less)
- author
- Baziki, Selva Bahar
; Norbäck, Pehr Johan
; Persson, Lars
LU
and Tåg, Joacim
LU
- publishing date
- 2017-05-01
- type
- Contribution to journal
- publication status
- published
- subject
- keywords
- Cross-border acquisitions, Institutions, M&As, Private equity, Trade, F23, F65, L13
- in
- European Economic Review
- volume
- 94
- pages
- 19 pages
- publisher
- Elsevier
- external identifiers
-
- scopus:85016157099
- ISSN
- 0014-2921
- DOI
- 10.1016/j.euroecorev.2017.02.012
- language
- English
- LU publication?
- no
- id
- 676854b7-1201-414d-b0de-1b4eff2a8489
- date added to LUP
- 2020-01-23 15:50:17
- date last changed
- 2022-05-04 07:56:03
@article{676854b7-1201-414d-b0de-1b4eff2a8489,
abstract = {{<p>An increasingly large share of cross-border acquisitions are undertaken by private equity-firms (PE-firms) and not by traditional multinational enterprises (MNEs). We propose a model of cross-border acquisitions in which MNEs and PE-firms compete over domestic assets and which incorporates endogenous financial frictions. MNEs’ advantages lie in firm-specific synergies and access to internal capital markets, whereas PE-firms are good at reorganizing target firms. We show that stronger firm-specific synergies, lower restructuring advantages for PE-firms, higher exit costs for PE-firms, better access to internal capital markets, a higher risk premium on lending, higher moral hazard problems, and higher trade costs all favor MNEs over PE-firms. We also present cross-country correlations that are consistent with these predictions.</p>}},
author = {{Baziki, Selva Bahar and Norbäck, Pehr Johan and Persson, Lars and Tåg, Joacim}},
issn = {{0014-2921}},
keywords = {{Cross-border acquisitions; Institutions; M&As; Private equity; Trade; F23; F65; L13}},
language = {{eng}},
month = {{05}},
pages = {{166--184}},
publisher = {{Elsevier}},
series = {{European Economic Review}},
title = {{Cross-border acquisitions and restructuring : Multinational enterprises and private equity-firms}},
url = {{http://dx.doi.org/10.1016/j.euroecorev.2017.02.012}},
doi = {{10.1016/j.euroecorev.2017.02.012}},
volume = {{94}},
year = {{2017}},
}