The Choice of Acquisition Form Around the World
53 Pages Posted: 25 Aug 2016 Last revised: 11 Feb 2017
Date Written: February 10, 2017
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: Suggested Citation