Cross Border Mergers and Acquisitions: The Role of Private Equity Firms
We study the role of private equity firms in cross border mergers and acquisitions. We find that private equity owned firms are more likely to become targets in crossborderM&A transactions. This effect is particularly strong in transactions where the target or its shareholders actively reach out for an acquirer. On average, cross borderdeals with private equity involvement are not associated with higher announcement returns. However, announcement returns are higher if the acquirer is owned 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 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.