Cross‐border mergers and acquisitions: The role of private equity firms

Abstract

We show that private equity ownership (“PE backing”) of the acquirer is a signal of deal quality in cross-border takeovers. As such, PE-backed acquirers experience higher announcement returns in cross-border takeovers, but only if targets are in poor information environments. We show that PE backing is a positive market signal because of PE firms' experience and networks that result from prior deals in target countries. We document that the market correctly anticipates that operating performance of PE-backed acquirers increases as a result of cross-border mergers and acquisitions (M&A).