Acquisition Finance: Are European Companies Different?

Abstract

The authors follow the methodology of a U.S.-based study to compare determinants of the financing choices of European and American acquirers. Differences in bank dependence and ownership concentration between Europe and the U.S. are potentially important for the financing decision.The authors' results indicate that information asymmetry and corporate control issues explain the high incidence of payment using cash rather than stock in Europe. In contrast to their U.S. counterparts, European acquirers do not use acquisition finance to get closer to their optimal capital structure. They also time the market by paying with stock when shares are overvalued.