Venture Capital Investments, Mergers and Competition Laws around the World

Abstract

We examine the relation between venture capital (VC) investments, M&A activity, and merger competition laws in 48 countries around the world. We find evidence of a strong positive association between VC investments and lagged M&A activity, consistent with the hypothesis that an active M&A market provides viable exit opportunities for VC companies and therefore incentivizes them to engage in more deals. We also explore the effects of country-level merger competition laws and also pro-takeover legislation passed internationally on VC activity. We find significant reductions in VC activity in countries with stricter competition laws and find that VC activity intensifies after enactment of country-level takeover-friendly legislation.

Keywords: Venture Capital, Mergers and Acquisitions, Merger Waves, Takeover Laws

JEL Classification: G15, G24, G33