We study the role of private equity firms in cross-border mergers and acquisitions. We find that private equity-owned firms are more likely to become targets in crossborderM&A transactions. This effect is particularly strong in transactions where the target or its shareholders actively reach out for an acquirer. On average, cross-borderdeals with private equity-involvement are not associated with higher announcement returns. However, announcement returns are higher if the acquirer is owned by a private equity firm and the target is from a country with poor corporate governance. We provide evidence indicating that the international networks and connections that result from prior cross-border deals can explain why private equity firms create value in such deals. Our findings suggest that private equity firms can help to reduce information asymmetries in certain cross-border M&A deals. We perform several tests to address possible endogeneity concerns.
# 12-031/2/DSF32 (2012-03-29)
- Mark Humphery-Jenner, University of New South Wales, Tilburg University; Zacharias Sautner, University of Amsterdam, Duisenberg school of finance; Jo-Ann Suchard, University of New South Wales
- Mergers and acquisitions, private equity, information asymmetries
- JEL codes:
- G34, G32, G24