2017

Cross-Border Acquisitions and restructuring: Multinational Enterprises and Private Equity Firms

Reprint No. 2017:21

Author(s): Selva Bahar Baziki, Pehr-Johan Norbäck, Lars Persson and Joacim TågYear: 2017 Title: European Economic Review Volume (No.): 94 (May) Pages: 166–184
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Preliminary version


An increasingly large share of cross-border acquisitions are undertaken by private equity-firms (PE-firms) and not by traditional multinational enterprises (MNEs). We propose a model of cross-border acquisitions in which MNEs and PE-firms compete over domestic assets and which incorporates endogenous financial frictions. MNEs’ advantages lie in firm-specific synergies and access to internal capital markets, whereas PE-firms are good at reorganizing target firms. We show that stronger firm-specific synergies, lower restructuring advantages for PE-firms, higher exit costs for PE-firms, better access to internal capital markets, a higher risk premium on lending, higher moral hazard problems, and higher trade costs all favor MNEs over PE-firms. We also present cross-country correlations that are consistent with these predictions.


Reference:
Bahar Baziki, Selva, Pehr-Johan Norbäck, Lars Persson and Joacim Tåg (2017), "Cross-Border Acquisitions and restructuring: Multinational Enterprises and Private Equity Firms". European Economic Review 94(May), 166–184.

Pehr-Johan Norbäck

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Lars Persson

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Joacim Tåg

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An Agenda for Europe

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The authors of this book, Niklas Elert, Magnus Henrekson and Mikael Stenkula, advise the economies of the European Union to become more entrepreneurial in promoting innovation and economic growth. The authors propose a reform strategy with respect to several aspects to achieve this goal.

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