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

30 Pages Posted: 26 Feb 2015 Last revised: 6 Mar 2017

See all articles by Selva Baziki

Selva Baziki

Government of the Republic of Turkey - Central Bank of the Republic of Turkey

Pehr-Johan Norback

Research Institute of Industrial Economics (IFN)

Lars Persson

Research Institute of Industrial Economics (IFN); Centre for Economic Policy Research (CEPR)

Joacim Tåg

Research Institute of Industrial Economics (IFN)

Date Written: March 5, 2017

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 and which incorporates endogenous financial frictions. MNEs' advantages lie in firm-specific synergies and access to internal capital markets, whereas PE-firms are good at reorganizing target firms. We show that stronger firm-specific synergies, lower restructuring advantages for PE-firms, higher exit costs for PE-firms, better access to internal capital markets, a higher risk premium on lending, higher moral hazard problems, and higher trade costs all favor MNEs over PE-firms. We also present cross-country correlations that are consistent with these predictions.

Keywords: Cross-border acquisitions, Institutions, Private Equity, M&As, Trade

JEL Classification: F23, F65, L13

Suggested Citation

Baziki, Selva and Norback, Pehr-Johan and Persson, Lars and Tåg, Joacim, Cross-Border Acquisitions and Restructuring: Multinational Enterprises versus Private Equity-Firms (March 5, 2017). IFN Working Paper No. 1057. Available at SSRN: https://ssrn.com/abstract=2569595

Selva Baziki

Government of the Republic of Turkey - Central Bank of the Republic of Turkey ( email )

Istiklal Cad. 10 Ulus
06100 Ankara, Ankara 06050
Turkey

Pehr-Johan Norback

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

Lars Persson

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Joacim Tåg (Contact Author)

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

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