METHOD-OF-PAYMENT CHOICE FOR INTERNATIONAL TARGETS

Though cross-border acquisitions have grown dramatically in value and frequency in the last ten years, little is known about returns to acquirers or their method-of-payment choice. This paper studies returns to U.S. bidders and their method-of-payment choice for acquisitions of foreign targets. Results indicate that bidder returns are higher for cash offers, for offers to private and subsidiary targets, if there is high insider ownership, and if there is high exchange rate variation. The method-of-payment choice for these bidders is linked to the target country’s legal regime and accounting standards, insider ownership, target type, and value uncertainty.