An Analysis of Characteristics of Large Cross-Border Mergers and Acquisitions
Academy of Accounting and Financial Studies, Vol. 17, No. 4
Posted: 2 Dec 2016
Date Written: 2013
This study investigates large cross border deals above USD 1 billion during the 2000 to 2011 time frame to explore whether deal values, valuation multiples and payment modes differ for acquisitions by emerging market firms when compared with acquisitions by developed market acquirers; and for diversified acquisitions vis-à-vis non diversified acquisitions. The impact of recession on deal values, valuation multiples and payment modes has also been analyzed. The study finds that mean deal values differ with the economy of the acquirer and target (emerging market/developed market). Valuation multiples are impacted by whether the acquirers are from developed or emerging economies and for diversified v/s same industry deals. Valuation multiples are not influenced by recession. Payment is more likely to be in the form of stock for larger deals, same industry deals and for deals where the target is from a developed economy.
There are several research studies which have looked at characteristics of acquirers, targets and market reactions to acquisition announcements; others have researched valuation multiples and premiums paid. However, understanding emerging market firms' deal characteristics vis-à-vis developed market firm's deals and understanding the impact of recession on deal characteristics raises a significant research question which is explored in this paper. These findings provide interesting insights for internationalization of firms and inputs in the deal structuring and negotiation process.
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