Private Equity and cross border m&a
Cross-Border Mergers and Acquisitions:
The Role of Private Equity Firms
Mark Humphery-Jenner
University of New South Wales
Zacharias Sautner
University of Amsterdam
Duisenberg School of Finance
Jo-Ann Suchard
University of New South Wales
This draft: July 2012
Abstract:
We study the role of private equity firms in cross-border mergers and acquisitions.
We find that private equity-backed firms are more likely to become targets in crossborder M&A transactions. This effect is particularly strong in transactions where the target or its shareholders actively reach out for an acquirer. On average, cross-border deals with private equity-involvement are not associated with higher acquirer announcement returns. However, announcement returns are higher if the acquirer is backed by a private equity firm and the target is from a country with poor corporate governance. We provide evidence indicating that the international networks and connections that result from prior cross-border deals and their access to experienced financial advisors can explain why private equity firms create value in such deals. Our findings suggest that private equity firms can help to reduce information asymmetries in certain cross-border M&A deals. We perform several tests to address possible endogeneity concerns.
JEL Code: G34, G32, G24
Keywords: Mergers and acquisitions, private equity, information asymmetries
____________________
Contact information: Mark Humphery-Jenner, School of Banking and Finance, Australian School of
Business, University of New South Wales, Sydney, Australia; email: m.humpheryjenner@unsw.edu.au;
Zacharias Sautner: Finance Group, Amsterdam Business School, University of Amsterdam,
Amsterdam, The Netherlands and Duisenberg School of Finance, Amsterdam, The Netherlands; email:
z.sautner@uva.nl; Jo-Ann Suchard: School of Banking and Finance, Australian School of Business,
University of New South Wales, Sydney, Australia; email:
The Role of Private Equity Firms
Mark Humphery-Jenner
University of New South Wales
Zacharias Sautner
University of Amsterdam
Duisenberg School of Finance
Jo-Ann Suchard
University of New South Wales
This draft: July 2012
Abstract:
We study the role of private equity firms in cross-border mergers and acquisitions.
We find that private equity-backed firms are more likely to become targets in crossborder M&A transactions. This effect is particularly strong in transactions where the target or its shareholders actively reach out for an acquirer. On average, cross-border deals with private equity-involvement are not associated with higher acquirer announcement returns. However, announcement returns are higher if the acquirer is backed by a private equity firm and the target is from a country with poor corporate governance. We provide evidence indicating that the international networks and connections that result from prior cross-border deals and their access to experienced financial advisors can explain why private equity firms create value in such deals. Our findings suggest that private equity firms can help to reduce information asymmetries in certain cross-border M&A deals. We perform several tests to address possible endogeneity concerns.
JEL Code: G34, G32, G24
Keywords: Mergers and acquisitions, private equity, information asymmetries
____________________
Contact information: Mark Humphery-Jenner, School of Banking and Finance, Australian School of
Business, University of New South Wales, Sydney, Australia; email: m.humpheryjenner@unsw.edu.au;
Zacharias Sautner: Finance Group, Amsterdam Business School, University of Amsterdam,
Amsterdam, The Netherlands and Duisenberg School of Finance, Amsterdam, The Netherlands; email:
z.sautner@uva.nl; Jo-Ann Suchard: School of Banking and Finance, Australian School of Business,
University of New South Wales, Sydney, Australia; email:
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