An Analysis of the Inward Cross-Border Mergers and Acquisitions in the U.K.: A Macroeconomic Perspective

Abstract

The incidence of cross-border mergers and acquisitions (CBM&As) has accelerated over the past two decades. Yet previous empirical work relating to CBM&As has been confined to firm-specific factors. This is against the backdrop that researchers have not been able to develop a coherent theory explaining the increasing trends of CBM&As activity. Building on prior studies, this study attempts to extend the few existing studies by using a simple empirical nonlinear framework to analyse the number of CBM&As inflows between 1987 and 2008 into the U.K. from a macroeconomic perspective. The main findings are that the response of the inflow is asymmetric as there is more persistence during stock market booms versus recessions. There are asymmetries with respect to relative prices suggesting that merger inflow activity appears to be higher once the stock prices rise above a threshold level of 8 per cent. Other factors which have significant bearing on CBM&As inflows are the rate of inflation and growth in real GDP.