Waves of International Mergers and Acquisitions

Abstract:     
Over the past two decades, cross-border M&As have totaled over eight trillion dollars and have fluctuated widely from year to year. In this paper, I establish four key facts about the dynamic patterns of cross-border mergers and the factors that drive them: Cross-border mergers come in waves that are highly correlated with business cycles. Most mergers occur when both the acquirer and the target economies are booming. Merger booms have both an industry-level component (productivity shocks) and a country-level component (financial shocks). Acquirers tend to be more productive and targets tend to be less productive, compared to their industry peers. These facts are consistent with the neoclassical theory of mergers in which productive firms expand overseas to seize new investment opportunities. But such facts are not consistent with the widely held views that most cross-border mergers occur when the target economies are in a recession or when the target stock markets are undervalued.

Number of Pages in PDF File: 57

Keywords: cross-border mergers, merger waves, capital flows

JEL Classification: F23, F44, G15, G34

working papers series