1. REPETITIVE CROSS-BORDER MERGERS & ACQUISITIONS Amrita Nain, Kyeong Lee, and Emma Xu 2014 LFE Workshop in Financial Economics Higher School of Economics, ICEF

2. Motivation Cross-border mergers and acquisitions (M&A) Recent trend: Total value of M&A is $2.6 trillion 36% is CBMA (Thompson Reuter, 2012) Many complexities and risks Cultural difference (Barkema et al., 1996; Ahern et al. 2012) Information environment (Louis, 2013) Economic nationalism (Dixit, 2011; Dinc and Erel, 2013) Law and regulation (Rossi and Volpin, 2004; Dikova et al. 2010)

3. Motivation Yet, many firms repeat cross-border deals in the same target country despite the risk and complexity. Why?

4. Unlike other papers, We examine SERIAL cross-border M&As. The effect of firms’ repetitive deal making on deal structure and shareholder wealth. Whether learning is induced from repetitive acquisitions in the same country. Or managerial hubris?

5. Main findings As acquirers make more deals in the same country, The time between successive deals declines The percentage of ownership stake acquired increases The percentage of cash payment increases Evidence of learning: Where learning gains exist, The time between deals declines more sharply and, bidder announcement returns increase as they make more deals

6. Contributions Learning in M&A Repeat cross-border M&A is an ideal setup What firms do in the face of risks in foreign countries? Explain why many firms go back despite risks The value of cross-border M&A Bidder CAR can vary across different stages of learning

7. Data Cross-border M&A deals between 50 countries during 1990-2010 SDC: deal-specific information e.g., announcement date, payment, etc. Stock returns CRSP for US firms Datastream for non-US firms Financial statement Compustat for US firms Datastream for non-US firms Macro-level variables Datastream MSCI: Stock market index returns World Bank: GDP Penn World Table: Currency

8. Empirical specification Deal order number in the same target country (DONC) Time between successive deals (TBD) Percentage of ownership stake acquired Percentage of consideration paid in cash Bidder announcement returns

9. Figure 1

10. Table 2. Deal characteristics Deal order number in the country (DONC)Obs.TBD%Acquired%Cash pmt 1st - 5th deals52,590835.1793.1169.30 6th - 10th deals1,021384.6797.9877.81 11th - 15th deals229280.1799.4181.44 16th deal or more100262.60100.0079.61

11. Empirical specification Regression model: Trend variable: control for time trend Macroeconomic variables: GDP per capita, GDP growth, … Fixed effects: acquirer-/target-fixed effects, year fixed effects

12. Table 4. Repeat cross-border deals Panel B Dependent variable TBD%Acquired%Cash payment [1] [2][3] Independent variable Coeff.t-statCoeff.t-statCoeff.t-stat DONC -76.560***-5.460.206***4.541.429***11.55 Trend 73.627***8.460.099***2.62-0.199-1.22 ΔGDP per capita 0.0310.160.009***2.75-0.011-1.23 ΔGDP growth rate 1.0630.530.0190.860.177*1.80 ΔStock market returns -0.521***-2.65-0.001-1.540.0010.24 ΔCurrency valuation -6.068**-2.38-0.062**-2.12-0.153-1.60 Acquirer country F.E. Yes Target country F.E. Yes Year F.E. Yes Standard error clustering Target country Obs. 11,26050,54411,535 R² 0.1520.1020.106

13. Table 4. Repeat cross-border deals Panel C Dependent variable TBD%Acquired%Cash payment [1] [2][3] Independent variable Coeff.t-statCoeff.t-statCoeff.t-stat DONC -282.453***-7.350.807***3.504.893***4.49 DONC² 16.580***5.30-0.066***-2.81-0.350***-3.85 Trend 75.088***10.460.094**2.46-0.241-1.47 ΔGDP per capita -0.018-0.110.009***2.82-0.010-1.09 ΔGDP growth rate 1.9201.010.0190.840.173*1.76 ΔStock market returns -0.511***-2.73-0.001-1.540.0010.26 ΔCurrency valuation -6.618***-2.76-0.062**-2.10-0.144-1.51 Acquirer country F.E. Yes Target country F.E. Yes Year F.E. Yes Standard error clustering Target country Obs. 11,26050,54411,535 R² 0.1660.1020.106

14. Are firms really learning? Hayward (2002), Aktas et al. (2013) Country-specific learning Memory lossExperience building TBD Learning gains

15. Table 5. Experience building vs. memory loss Dependent variable = Abnormal TBD Short TBD (<25%)Long TBD (>75%)Short TBD (<25%)Long TBD (>75%) Independent variable Coeff.t-statCoeff.t-statCoeff.t-statCoeff.t-stat DONC -66.540**-2.48106.5091.05 DONC² 7.056***2.75-7.405-0.88 Deal order number (DON) -3.265-0.9918.775*1.91 DON² 0.0560.57-0.407-1.37 Trend 2.8230.83-36.983-0.443.3721.02-33.460-0.39 ΔGDP per capita 0.0370.22-0.110-0.250.0350.21-0.108-0.25 ΔGDP growth rate -0.183-0.133.1440.78-0.339-0.253.2430.78 ΔStock market returns 0.396**2.060.2720.350.395**2.070.3060.39 ΔCurrency valuation -0.097-0.07-6.631*-1.790.2360.17-6.473*-1.69 Acquirer country F.E.Yes Target country F.E.Yes Year F.E.Yes Standard error clusteringTarget country Obs.2,8012,8215,6215,639 R²0.1230.1870.1140.187

16. Merger announcement return Bidder CAR decreases as they make more deals Fuller, Netter, & Stegemoller (2002), Bertrand & Betschinger (2012) Hubris: Billett & Qian (2008) Not necessarily hubris: Ahern (2010) Learning: Aktas, DeBodt, & Roll (2009, 2013) We estimate CAR using two factor market model (Griffin (2002))

17. Table 7. Bidder announcement returns CAR(-1, +1)CAR(-2, +2)CAR(-3, +3) [1][2][3] Independent variableCoeff.t-statCoeff.t-statCoeff.t-stat DONC -0.146**-2.39-0.212**-2.05-0.295***-4.36 DONC² 0.010**2.360.019*1.690.023***4.12 Acqurier size -0.088***-2.73-0.098**-2.56-0.238***-10.03 Acquirer M/B 0.0010.05-0.007-0.400.0231.50 Public target -0.230-1.52-0.355-1.53-0.436*-1.80 Related M&A 0.0170.260.0740.750.0760.90 Stock deal 0.2370.980.4321.560.2120.69 Trend 0.059***4.250.064***3.830.071***2.58 ΔGDP per capita -0.001-1.14-0.001-0.610.00010.11 ΔGDP growth rate -0.004-0.77-0.009-1.600.0030.53 Δstock market returns -0.002-0.440.0081.380.0071.23 Δcurrency valuation 0.0071.370.020***3.210.0050.07 Acquirer country F.E. Yes Target country F.E. Yes Year F.E. Yes Standard error clustering Target country Obs. 22,036 R² 0.067

18. Table 8. Experience building vs. memory loss CAR(-1, +1)CAR(-2, +2)CAR(-3,+3) Short TBDLong TBDShort TBDLong TBDShort TBDLong TBD [1][2][3][4][5][6] Independent var. Coeff.t-statCoeff.t-statCoeff.t-statCoeff.t-statCoeff.t-statCoeff. t-stat DONC0.7592.460.1990.690.6921.840.2650.770.7961.980.0570.12 DONC²-0.072-2.64-0.035-1.27-0.062-1.84-0.043-1.31-0.077-2.06-0.025-0.60 Acqurier size-0.121-2.71-0.132-4.43-0.184-2.99-0.181-4.39-0.192-4.06-0.094-2.36 Acqurier M/B0.0401.01-0.025-0.950.0561.440.000-0.010.0651.580.0120.45 Public target-0.310-0.42-0.615-1.24-0.286-0.25-0.717-1.330.1140.09-0.555-0.94 Related M&A-0.225-0.900.3392.23-0.170-0.63-0.060-0.2-0.242-0.86-0.143-0.43 Stock deal0.0100.020.7161.070.6480.511.7412.190.5110.451.5451.95 Trend0.0240.450.1250.22-0.012-0.250.8191.140.0520.870.4440.42 ΔGDP per capita0.0000.05-0.001-0.370.0000.09-0.001-0.53-0.001-0.27-0.0004-0.21 ΔGDP growth rate-0.008-0.330.0070.21-0.031-1.210.0240.700.0140.470.0150.37 ΔStock market return0.000-0.01-0.001-0.150.0020.91-0.003-0.71-0.003-0.97-0.002-0.39 ΔCurrency valuation-0.003-0.11-0.033-1.140.0401.40-0.038-1.05-0.005-0.15-0.032-0.79 Fixed effectsAcquirer-/target-country, Year S.E. clusteringTarget country Obs.1,6481,9381,6481,9381,6481,938 R²0.0640.0670.0650.0800.0650.073

19. Table 8. Country-specific learning CAR(-1, +1)CAR(-2, +2)CAR(-3,+3) Short TBDLong TBDShort TBDLong TBDShort TBDLong TBD [1][2][3][4][5][6] Independent var.Coeff.t-statCoeff.t-statCoeff.t-statCoeff.t-statCoeff.t-statCoeff.t-stat DON-0.010-0.180.0270.640.0520.820.0160.390.0070.100.0501.01 DON²0.000-0.06-0.001-0.81-0.001-0.67-0.001-0.500.000-0.08-0.002-1.40 Acqurier size-0.113-2.76-0.143-5.86-0.197-2.97-0.193-5.07-0.200-3.56-0.109-2.58 Acqurier M/B0.0370.99-0.023-0.870.0561.490.0020.070.0631.580.0150.58 Public target-0.368-0.51-0.594-1.20-0.313-0.28-0.692-1.280.0700.06-0.531-0.90 Related M&A-0.215-0.880.3432.18-0.165-0.61-0.056-0.19-0.236-0.83-0.134-0.43 Stock deal-0.031-0.060.7371.110.6570.521.7542.190.5080.461.5912.00 Trend0.0400.770.0830.15-0.007-0.150.7701.090.0600.990.3870.38 ΔGDP per capita0.000-0.01-0.001-0.410.0000.03-0.001-0.56-0.001-0.31-0.001-0.29 ΔGDP growth rate-0.004-0.170.0080.26-0.028-1.050.0250.770.0170.560.0170.42 ΔStock market returns0.000-0.08-0.001-0.230.0020.81-0.003-0.79-0.003-1.01-0.002-0.45 ΔCurrency valuation-0.009-0.29-0.035-1.260.0351.20-0.041-1.14-0.010-0.30-0.035-0.87 Fixed effectsAcquirer-/target-country, Year S.E. clusteringTarget country Obs.1,6481,9381,6481,9381,6481,938 R²0.060.0660.0630.0790.0630.077

20. Concluding remarks Bidders repeat deals in the same country… They make deals faster and faster They buy larger ownership stake in the target firm They use more cash as the payment method Bidders learn through serial acquisitions in the country. Timing of learning matters We welcome your suggestions!