Cross-Border Mergers and Acquisitions: The Role of Private Equity Firms

We show that it is a signal of deal quality in cross-border M&A if acquirers have private equity firms as owners (‘PE backing’). As such, announcements of cross-border M&A deals by PE-backed acquirers are associated with positive stock price reactions, 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 close by documenting that the market correctly anticipates that operating performance of PE-backed acquirers increases as a result of cross-border M&A