The Value of Access to Finance: Evidence from M&A
56 Pages Posted: 2 Nov 2014 Last revised: 14 Jul 2017
Date Written: June 14, 2017
We examine synergies in mergers and acquisitions generated by firms’ comparative advantages in access to bank finance. We find robust evidence that greater access to bank finance increases firms’ attractiveness as acquisition targets. Targets’ comparative advantage in bank finance improves bank credit supply and reduces financing costs for the merged firms. These effects are more pronounced for acquirers with greater frictions in accessing bank loans and acquirers with greater growth opportunities. Overall, this paper reveals that targets, not just acquirers, contribute to financial synergies in M&A.