The Choice of Acquisition Form Around the World

53 Pages Posted: 25 Aug 2016 Last revised: 11 Feb 2017

See all articles by Peng Huang

Peng Huang

University of Waikato

Mark Humphery-Jenner

UNSW Business School; Financial Research Network (FIRN)

Ronan Powell

University College Dublin (UCD) - Michael Smurfit Graduate School of Business

Date Written: February 10, 2017

Abstract

We examine the choice between minority and majority (controlling) acquisitions around the world. We analyze 56,138 domestic and cross-border minority and majority acquisitions made by listed firms covering 48 acquirer countries over the 1990 to 2010 period. We find that minority acquisitions are more common in countries with greater governance risk and less developed equity markets. They are also more common in cross-border deals, especially when the acquirer and target countries are distant, use different languages, or have different legal, political and economic regimes. These findings are consistent with the idea that minority acquisitions are most useful when integration difficulties and information asymmetries might bias against obtaining full control, or when retaining target management is desirable. We also show that minority acquisitions are a useful ‘stepping stone’ to a controlling position, with minority acquisitions performing this function more often in countries with greater governance risk, and less developed equity markets. Overall, these findings go some way to explaining the choice between minority and majority acquisitions across countries, and in cross-border deals.

Keywords: mergers, major acquisitions, minority acquisitions, cross-country, cross-border

JEL Classification: G34

Suggested Citation

Huang, Peng and Humphery-Jenner, Mark and Powell, Ronan G., The Choice of Acquisition Form Around the World (February 10, 2017). 29th Australasian Finance and Banking Conference 2016. Available at SSRN: https://ssrn.com/abstract=2826044 or http://dx.doi.org/10.2139/ssrn.2826044

Peng Huang

University of Waikato ( email )

Te Raupapa
Private Bag 3105
Hamilton, 3240
New Zealand

Mark Humphery-Jenner

UNSW Business School ( email )

UNSW Business School
High St
Sydney, NSW 2052
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Ronan G. Powell (Contact Author)

University College Dublin (UCD) - Michael Smurfit Graduate School of Business ( email )

Blackrock, Co. Dublin
Ireland

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