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Review of World Economics

Cross–Border Mergers & Acquisitions with Financially Constrained Owners

Scientific Article in English
Reference
Berg, Aron, Pehr-Johan Norbäck and Lars Persson (2017). “Cross–Border Mergers & Acquisitions with Financially Constrained Owners”. Review of World Economics 153(3), 433–456. doi.org/10.1007/s10290-017-0281-5

Authors
Aron Berg, Pehr-Johan Norbäck, Lars Persson

Mergers give acquirers control over the assets of the merged entity and give sellers control over financial assets. We propose a cross-border merger model with home biased financially constrained owners in which the subsequent investments of the buyer and the seller can be determined. We show that policies blocking foreign acquisitions to protect the domestic industry can be counterproductive. Foreign acquisition can increase domestic owners’ investment in growth industries by reducing their financial restrictions. This calls for a ‘‘financial efficiency’’ defence in merger law. We also show that cross-border M&As are partly driven by the seller’s alternative investment opportunities.

Pehr-Johan Norbäck

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pehr-johan.norback@ifn.se