Cross-Border Acquisitions: The Case of Spacs

45 Pages Posted: 26 Dec 2023 Last revised: 1 Jun 2024

See all articles by Ekaterina E. Emm

Ekaterina E. Emm

Seattle University

Bo Han

Seattle University

Bochen Li

Monmouth University

Date Written: April 24, 2024

Abstract

We examine one aspect of special purpose acquisition companies (SPACs) in the U.S. market, namely their focus on foreign targets. Using a comprehensive sample of 1,737 SPAC IPO filings and 541 SPAC mergers with firms from 32 countries between 2003 and 2022, we study both the geographic preference revealed in SPACs’ IPO filings and the geographic location of the target firm in the subsequent cross-border acquisitions. Our results show that 69% of SPACs with a declared foreign focus are subsequently successful in acquiring a foreign target. However, they take longer time to identify and complete mergers compared to those with a domestic focus. When a merger is announced, SPACs with U.S. targets exhibit significantly higher announcement returns compared to those with foreign targets, with an even more pronounced difference when targets are from China or other emerging economies. Post merger, all SPACs exhibit poor market-adjusted returns. SPACs with Chinese targets suffer the worst one-year post-merger stock performance, whereas those with firms from other emerging economies perform considerably better than the rest of their peers. Further examination suggests that country-level factors, such as investor protection and accounting standards, are significant factors in post-merger financial performance of SPACs engaged in cross-border acquisitions.

Keywords: Special Purpose Acquisition Company, SPAC, Cross-border mergers and acquisitions, IPO, Emerging markets, China

Suggested Citation

Emm, Ekaterina E. and Han, Bo and Li, Bochen, Cross-Border Acquisitions: The Case of Spacs (April 24, 2024). Available at SSRN: https://ssrn.com/abstract=4675952 or http://dx.doi.org/10.2139/ssrn.4675952

Ekaterina E. Emm

Seattle University

900 Broadway
Seattle, WA 98122
United States

Bo Han

Seattle University ( email )

901 12th Avenue
Seattle, WA 98122
United States

Bochen Li (Contact Author)

Monmouth University ( email )

400 Cedar Ave
West Long Branch, NJ 07764
United States

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