Do All Networks Facilitate International Commerce? The Case of Us Law Firms and the Mergers and Acquisitions Wave of the Late 1990s
CIES Discussion Paper No. 0146
30 Pages Posted: 12 Dec 2001
Date Written: December 10, 2001
Unlike prior research, which has tended to focus on the effects of business networks on the international flow of goods and services, this paper examines the extent to which the international presence of US law firms stimulated or retarded overseas mergers and acquisitions (M&A) activity by American corporations in 1999. In a world of merger notification requirements and reviews, these law firms can help clients overcome regulatory hurdles abroad, adding grease to the international market for corporate assets. These law firms can also oppose transactions that are inimical to their US clients' interests, throwing sand into the wheels of this form of international commerce. Evidence is presented here to suggest that the US law firm with the greatest global reach (Baker & McKenzie) has facilitated such commerce, whereas the combined effect of five smaller US law firms with considerable global footprints appears to have reduced US outward M&A in 1999. The geographical distribution of these six law firms' offices around the world is such that, on net, many non-G7 nations have experienced US M&A transactions that are larger in total value and in average size that had those law firms not operated in these jurisdictions. This, in turn, suggests that these nations' own firms are now more exposed to pressures from the international market for corporate control. A byproduct of this study is the potentially provocative finding that the presence of national merger review procedures abroad tends to cut in half the amount of overseas M&A undertaken by US corporations.
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