The international market for corporate control and high-valuation cross-border acquisitions: Exploring trends and patterns

Abstract

Purpose

Nested within the industrial organization and corporate finance literature, this paper aims to analyze the market for cross-border mergers and acquisitions (M&A) in the world economy, developed economies, developing economies and transition economies. As multinational companies hold a large proportion of cash reserves and expand into diverse geographic markets, the paper aims to examine market patterns of high-valuation cross-border acquisition transactions. Specifically, it proposes a framework explaining the influential factors, motives and effects of high-valuation transactions by discussing some case evidences.

Design/methodology/approach

Drawing upon inductive and deductive logic, the paper discusses market trends and market patterns of cross-border M&A transactions by triangulating archival data analyses and accessible M&A literature. Some case examples are derived from news archive and official source sites. Regarding sample period, it considers the past two decades 1994-2013 to show market trends in various institutional settings and the past decade 2004-2013 to present market patterns of 62 high-valuation cross-border deals.

Findings

The transaction analysis indicates four cycles in the market trend, namely, growing period (1994-2000); declining, but promising period (2001-2006); financial crisis period (2007-2008); and recovering, but reversing period (2009-2013). A number of acquisitions undertaken by firms from emerging economies around the 2007-2008 global financial crisis have exemplified geographic (product) diversification as a primary motive of firm’s global strategy. In particular, a large proportion of sample high-valuation deals are spotted in developed economies such as the USA and the UK. In case of industry pattern, a good number of high-valuation deals are noticed in banking and finance, telecommunications and oil and gas sector.

Originality/value

Although several scholars have examined cross-border acquisitions in economics, corporate finance, strategy and international business literature, there is hardly any study that analyzes high-profile cross-border M&A deals. An exclusive market analysis of high-valuation international deals is important for several reasons. This paper fills this knowledge gap by showing both market trends and market patterns of cross-border M&A transactions. Importantly, to date, this paper is the first to propose a framework explaining the influential factors, motives and effects of high-valuation M&A transactions.

Citation

Liang, J., Xie, E. and Redding, K.S. (2017), "The international market for corporate control and high-valuation cross-border acquisitions: Exploring trends and patterns", International Journal of Law and Management, Vol. 59 No. 6, pp. 876-898. https://doi.org/10.1108/IJLMA-04-2016-0040