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

Lars Persson

No 11953, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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 (search for similar items in EconPapers)
JEL-codes: F23 F65 L13 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec
Date: 2017-04
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