Discussion paper

DP3998 Cross-Border Acquisitions and Greenfield Entry: Profitability and Stock Market Value

This Paper studies cross-border acquisitions and greenfield entry in a multi-firm setting. Acquisition entry is more likely when the acquirer gains a strong position in the product market, relative to greenfield entrants. We also show that such acquisitions might have a low profitability, however. The reason is that the bidding competition over the domestic assets is then so fierce that the firms involved would be better off not starting a bidding war. Moreover, this implies that domestic firms will then sell their assets at a substantially higher price than their reservation price. Implications for stock market values are also derived.

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Citation

Persson, L and P Norbäck (2003), ‘DP3998 Cross-Border Acquisitions and Greenfield Entry: Profitability and Stock Market Value‘, CEPR Discussion Paper No. 3998. CEPR Press, Paris & London. https://cepr.org/publications/dp3998