2017

Cross-Border Mergers & Acquisitions with Financially Constrained Owners

Reprint No. 2017:34

Author(s): Aron Berg, Pehr-Johan Norbäck and Lars PerssonYear: 2017 Title: Review of World Economics Volume (No.): 153 (3) Pages: 433–456
Online article (restrictions may apply)

Cross-Border Mergers & Acquisitions with Financially Constrained Owners Aron Berg, Pehr-Johan Norbäck and 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.


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.

Pehr-Johan Norbäck

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Lars Persson

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lars.persson@ifn.se

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