An empirical investigation of factors affecting cross-border acquisitions: the United States vs. United Kingdom experience

Abstract

Since the 1981-1982 recession in the United States, there has been a marked increase in domestic merger and acquisition activity. For example, the number of acquisitions involving U.S. companies was 2,296 and 3,701, respectively, for 1982 and 1987. The value of mergers involving U.S. companies also increased from about $60 billion in 1982 to over $167 billion in 1987. Cross-border acquisitions involving U.S. firms have also become more common, increasing from 364 in 1982 to 553 in 1987. During 1988, the number of cross-border acquisitions involving U.S. firms reached 605. While the number of annual cross-border acquisitions has generally increased over time, the composition of cross-border activity has shifted abruptly in some periods. For example, U.S. acquisitions of non-U.S. firms increased modestly from 149 in 1983 to 177 in 1987 while foreign acquisitions of U.S. firms rose substantially over this same period. In 1983, there were 116 foreign acquisitions of U.S. firms, valued at about $2.2 billion. This increased to 363 foreign acquisitions of U.S. firms valued at about $42 billion in 1987. To put it another way, U.S. firms acted as acquiring firms in about 56 percent of the cross-border acquisitions involving U.S. firms in 1983, versus only about 26 percent in 1987. Some of the more publicized foreign acquisitions of U.S. firms include Sony’s acquisition of CBS Records Group, Bridgestone’s acquisition of Firestone Tire & Rubber Co., Nestle’s acquisition of Carnation, and the Royal Dutch/Shell buyout of Shell Oil.