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

Author

Listed:
  • Baziki, Selva

    (Department of Economics)

  • Norbäck, Pehr-Johan

    (Research Institute of Industrial Economics (IFN))

  • Persson, Lars

    (Research Institute of Industrial Economics (IFN))

  • Tåg, Joacim

    (Research Institute of Industrial Economics (IFN))

Abstract

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. MNEs' advantage lies in firm-specific synergies and retained earnings, whereas PE-firms are good at reorganizing target firms. Prevailing interest rates do not work in favor of PE-firms, but a lower risk premium and a better financial market development does. Stronger firm-specific synergies, however, favors MNEs. Performing a welfare analysis, we show that a policy of restricting PE-firms from buying domestic assets can be counterproductive.

Suggested Citation

  • Baziki, Selva & Norbäck, Pehr-Johan & Persson, Lars & Tåg, Joacim, 2015. "Cross-Border Acquisitions and Restructuring: Multinational Enterprises versus Private Equity-Firms," Working Paper Series 1057, Research Institute of Industrial Economics.
    • Handle: RePEc:hhs:iuiwop:1057
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    References listed on IDEAS

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    More about this item

    Keywords

    Cross-border; International Restructuring; Ownership Efficiency; Private Equity; M&As;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F65 - International Economics - - Economic Impacts of Globalization - - - Finance
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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