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Cross-border mergers & acquisitions with financially constrained owners

Berg, Aron LU ; Norbäck, Pehr Johan and Persson, Lars (2017) In Review of World Economics
Abstract

Mergers give acquirers control over the assets of the merged entity and give sellers control over financial assets. We propose a cross-border merger model with home biased financially constrained owners in which the subsequent investments of the buyer and the seller can be determined. We show that policies blocking foreign acquisitions to protect the domestic industry can be counterproductive. Foreign acquisition can increase domestic owners’ investment in growth industries by reducing their financial restrictions. This calls for a “financial efficiency” defence in merger law. We also show that cross-border M&As are partly driven by the seller’s alternative investment opportunities.

Please use this url to cite or link to this publication:
author
organization
publishing date
type
Contribution to journal
publication status
epub
subject
keywords
Corporate governance, Investment liberalization, Mergers & acquisitions, Ownership
in
Review of World Economics
pages
24 pages
publisher
Springer
external identifiers
  • scopus:85014915010
  • wos:000404158900001
ISSN
1610-2878
DOI
10.1007/s10290-017-0281-5
language
English
LU publication?
yes
id
4d8fe83b-77df-4c15-8f52-801fd4fdb4a7
date added to LUP
2017-03-23 09:01:43
date last changed
2017-09-18 11:33:50
@article{4d8fe83b-77df-4c15-8f52-801fd4fdb4a7,
  abstract     = {<p>Mergers give acquirers control over the assets of the merged entity and give sellers control over financial assets. We propose a cross-border merger model with home biased financially constrained owners in which the subsequent investments of the buyer and the seller can be determined. We show that policies blocking foreign acquisitions to protect the domestic industry can be counterproductive. Foreign acquisition can increase domestic owners’ investment in growth industries by reducing their financial restrictions. This calls for a “financial efficiency” defence in merger law. We also show that cross-border M&amp;As are partly driven by the seller’s alternative investment opportunities.</p>},
  author       = {Berg, Aron and Norbäck, Pehr Johan and Persson, Lars},
  issn         = {1610-2878},
  keyword      = {Corporate governance,Investment liberalization,Mergers & acquisitions,Ownership},
  language     = {eng},
  month        = {03},
  pages        = {24},
  publisher    = {Springer},
  series       = {Review of World Economics},
  title        = {Cross-border mergers & acquisitions with financially constrained owners},
  url          = {http://dx.doi.org/10.1007/s10290-017-0281-5},
  year         = {2017},
}