Can Club Deals Reduce Institutional Barriers to Cross-Border LBOs?

41 Pages Posted: 2 Jun 2016 Last revised: 24 Jan 2017

See all articles by Chen Liu

Chen Liu

Trinity Western University

Lynnette D. Purda

Queen's University - Smith School of Business

Hui Zhu

University of Ontario Institute of Technology (UOIT)

Date Written: December 14, 2016

Abstract

A common suggestion for facilitating cross-border investment is to partner with a firm in the target nation. Unfortunately, high quality partners are not always available. We hypothesize and test whether investment syndicates consisting of nationally diverse private equity (PE) investors provide an attractive alternative to local partners for overcoming institutional barriers to cross-border investment. Our empirical results show that syndicates have on average lower institutional distance from the target than deals involving a single PE-firm and that diverse syndicates provide mitigating effects to increase the probability of successful deal completion while reducing negotiating time.

Keywords: Syndicates, Private Equity, Leveraged Buyouts

JEL Classification: F23, G34

Suggested Citation

Liu, Chen and Purda, Lynnette D. and Zhu, Hui, Can Club Deals Reduce Institutional Barriers to Cross-Border LBOs? (December 14, 2016). Available at SSRN: https://ssrn.com/abstract=2788049 or http://dx.doi.org/10.2139/ssrn.2788049

Chen Liu

Trinity Western University ( email )

7600 Glover Road
Langley, British Columbia V2Y 1Y1
Canada

Lynnette D. Purda (Contact Author)

Queen's University - Smith School of Business ( email )

Smith School of Business - Queen's University
143 Union Street
Kingston, Ontario K7L 3N6
Canada
613-533-6980 (Phone)

Hui Zhu

University of Ontario Institute of Technology (UOIT) ( email )

2000 Simcoe Street North
Oshawa, Ontario L1H 7K4
Canada

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