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Mitigating risks in cross-border acquisitions

  • Mantecon, Tomas
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    Compared to domestic acquisitions, cross-border acquisitions present greater challenges for buyers. This article analyzes the use of contingent payments, joint ventures, and toehold investments as potential mechanisms for reducing uncertainty in cross-border acquisitions. Toehold investments and earnout payments are associated with larger gains to buyers in domestic acquisitions, but not in cross-border acquisitions. The results indicate that joint ventures can be an effective mechanism to ameliorate the uncertainty associated with cross-border acquisitions in the presence of severe valuation uncertainties and country investment risks.

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    File URL: http://www.sciencedirect.com/science/article/B6VCY-4V4VY64-1/2/f90e489a0be120f9a3d1e99729bfff3a
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    Article provided by Elsevier in its journal Journal of Banking & Finance.

    Volume (Year): 33 (2009)
    Issue (Month): 4 (April)
    Pages: 640-651

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    Handle: RePEc:eee:jbfina:v:33:y:2009:i:4:p:640-651
    Contact details of provider: Web page: http://www.elsevier.com/locate/jbf

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