Determinants of Cross-Border Mergers and Acquisitions in Developed Markets: A Recent Empirical Analysis and it´s Practical Implications
André Tomfort* and Julia Dmitriva
ABSTRACT
Cross-border mergers and acquisitions are contributing to economic growth, welfare, market expansions and competitiveness. Many countries are thriving to attract them and in political discussions it is one of the hot topics how to do so. For policy makers and corporate decision makers it is crucial to know what the real drivers of foreign corporate investments are. For this purpose, this study will analyze cross-border mergers and acquisitions in industrialized countries. The paper is focusing on two key questions:
• What are the key determinants for cross-border mergers and acquisitions?
• Does industry similarity between countries affect the deal frequency?
The paper contains a theoretical and a literature review followed by an empirical investigation which was based on descriptive statistical methods and a regression analysis. The empirical findings revealed a concentration of transactions in certain countries, particularly the US, Canada, UK, Germany, and France. The healthcare and financial industries lead the way as the top sectors, followed by the industrial and technology sector. Some sectors, such as finance, healthcare, and high technology, had a high frequency of intra-industry cross-border transactions. The regression results showed that GDP size as a proxy for the attractiveness of the local market had the biggest impact. Cultural affinity and political stability followed in terms of impact, when the USA was excluded from the dataset. Including the USA in the estimation proved the strong significance of the GDP size again but also revealed the importance of lower corporate taxes, however, to a clearly lesser extent.
