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

Selva Bahar Baziki, Pehr-Johan Norbäck, Lars Persson and Joacim Tåg

No 1057, Working Paper Series from Research Institute of Industrial Economics

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. MNEs' advantage lies in firm-specific synergies and retained earnings, whereas PE-firms are good at reorganizing target firms. Prevailing interest rates do not work in favor of PE-firms, but a lower risk premium and a better financial market development does. Stronger firm-specific synergies, however, favors MNEs. Performing a welfare analysis, we show that a policy of restricting PE-firms from buying domestic assets can be counterproductive.

Keywords: Cross-border; International Restructuring; Ownership Efficiency; Private Equity; M&As (search for similar items in EconPapers)
JEL-codes: F23 F65 L13 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2015-01-26
New Economics Papers: this item is included in nep-bec and nep-cse
References: View references in EconPapers View complete reference list from CitEc
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Published as Baziki, Selva, Pehr-Johan Norbäck, Lars Persson and Joacim Tåg, 'Cross-Border Acquisitions and Restructuring: Multinational Enterprises versus Private Equity-Firms' in European Economic Review, 2017, pages 166-184.

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