Cross-Border Acquisitions into the UK - an Analysis of Target Company Returns

Abstract

In this paper we investigate whether there is evidence of a target company cross-border effect by comparing the premium for those companies acquired by other UK companies with the premium for those acquired by non-UK firms. Using data for the period 1986-1991, it is found that target company shareholders gain significantly more from cross-border than from domestic acquisitions. The cross-border effect appears to be partly attributable to a significantly higher proportion of cross-border than domestic bids being full cash offers, and target company shareholders are found to gain significantly more from cash than from equity offers. However, even when controlling for these and other bid characteristics, the target company cross-border effect remains highly significant, amounting to somewhere between 6.02 and 9.17 percentage points, depending on model specification.