Mitigating risks in cross-border acquisitions

Tomas Mantecon

Journal of Banking & Finance, 2009, vol. 33, issue 4, 640-651

Abstract: Compared to domestic acquisitions, cross-border acquisitions present greater challenges for buyers. This article analyzes the use of contingent payments, joint ventures, and toehold investments as potential mechanisms for reducing uncertainty in cross-border acquisitions. Toehold investments and earnout payments are associated with larger gains to buyers in domestic acquisitions, but not in cross-border acquisitions. The results indicate that joint ventures can be an effective mechanism to ameliorate the uncertainty associated with cross-border acquisitions in the presence of severe valuation uncertainties and country investment risks.

Keywords: Cross-border; acquisitions; Investment; uncertainty; Joint; ventures (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (33)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:33:y:2009:i:4:p:640-651

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