Cross-Border Acquisitions and Restructuring: Multinational Enterprises and Private Equity-Firms

33 Pages Posted: 10 Apr 2017

See all articles by Lars Persson

Lars Persson

Research Institute of Industrial Economics (IFN); Centre for Economic Policy Research (CEPR)

Date Written: April 2017

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 PE-firms. We also present cross-country correlations that are consistent with these predictions.

Keywords: Cross-border acquisitions, institutions, M&As, private equity, Trade

JEL Classification: F23, F65, L13

Suggested Citation

Persson, Lars, Cross-Border Acquisitions and Restructuring: Multinational Enterprises and Private Equity-Firms (April 2017). CEPR Discussion Paper No. DP11953, Available at SSRN: https://ssrn.com/abstract=2949801

Lars Persson (Contact Author)

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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