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.
Review of World Economics
Cross–Border Mergers & Acquisitions with Financially Constrained Owners
Scientific Article in English