Valuation Gaps and Deal Outcomes in Cross-Border M&A: The Mitigating Role of Investment Banks
Keywords:
cross-border mergers and acquisitions, valuation gap, investment bank, institutional distance, deal completionAbstract
Cross-border mergers and acquisitions (M&A) have emerged as a critical avenue for global investment, yet they frequently encounter negotiation breakdowns due to valuation disagreements between acquiring and target firms. While prior research has primarily focused on institutional and cultural determinants of such valuation gaps, the intermediary mechanisms that may alleviate these disparities remain underexplored. This study addresses this gap by investigating how investment banks moderate the impact of valuation gaps on deal outcomes in cross-border M&A. Utilizing a dataset of 1,842 transactions spanning 2010 to 2024 from the Refinitiv Eikon and Zephyr databases, logistic regression analyses reveal that larger valuation gaps significantly decrease the likelihood of deal completion (β = −0.63, p < 0.01), whereas engagement with reputable investment banks mitigates this negative effect (β = 0.41, p < 0.05), particularly in contexts characterized by high institutional distance. Complementary evidence drawn from the ArcelorMittal-Essar Steel, Tencent-Supercell, and Geely-Volvo cases illustrates three distinct mediation mechanisms: reputational certification, information alignment, and structural bridging. These findings underscore the critical coordinating role of financial intermediaries in reducing valuation friction and offer practical implications for the selection of advisory services as well as for enhancing regulatory transparency in international deal-making.
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