Cross-Border Mergers and Acquisitions: The Role of Private Equity Firms
Strategic Management Journal, Forthcoming
40 Pages Posted: 25 Feb 2012 Last revised: 19 Sep 2016
Date Written: July 17, 2016
We show that it is a signal of deal quality in cross-border M&A if acquirers have private equity firms as owners (‘PE backing’). As such, announcements of cross-border M&A deals by PE-backed acquirers are associated with positive stock price reactions, but only if targets are in poor information environments. We show that PE backing is a positive market signal because of PE firms’ experience and networks that result from prior deals in target countries. We close by documenting that the market correctly anticipates that operating performance of PE-backed acquirers increases as a result of cross-border M&A.
Keywords: Mergers and acquisitions, private equity, information asymmetries
JEL Classification: G34, G32, G24
Suggested Citation: Suggested Citation