The Effect of Macro-level Factors on Premiums in Cross-Border Mergers & Acquisitions.

Abstract

Extent literature has been developed describing how M&A premiums are influenced. Various factors have been identified to explain such premiums at the deal level, mostly from target and acquiring company characteristics. However, little research to date has incorporated multiple macroeconomic factors into a model in order to explain premiums. In limited research macroeconomic factors are considered when looking at flows of M&A across borders, to explain volumes. This research combines findings on the effect of macro-level factors on M&A volume, with earlier findings of deal level effects on premiums, to create a more complete model of what makes up acquisition premiums. This will help fill a gap in the literature regarding macro-level data and M&A premiums. A more practical aim is to improve efficiency for future cross-border M&A acquirers, targets and other parties involved in determining the price of such deals. The findings of this research show that inflation, along with investor protection and accounting standards influence M&A premiums. The conclusion is that not just acquirer and target company characteristics are influential in determining premiums, but also the characteristics of the country in which a target is located is of importance