Working Paper No. 1057

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

Published: January 28, 2015, revised March 2017Pages: 30Keywords: Cross-border; International Restructuring; Ownership Efficiency; Private Equity; M&AsJEL-codes: F23; F65; L13
Published version

Cross-Border Acquisitions and Restructuring: Multinational Enterprises and Private Equity Firms Selva Bahar Baziki, Pehr-Johan Norbäck, Lars Persson and Joacim Tåg


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.

Pehr-Johan Norbäck

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Lars Persson

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Ph: +46 8 665 4504
lars.persson@ifn.se

Joacim Tåg

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Ph: +46 8 665 4524
joacim.tag@ifn.se

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