challenges to globalization: analyzing the economics · 2008. 11. 12. · border m&a. fourth,...
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This PDF is a selection from a published volume from theNational Bureau of Economic Research
Volume Title: Challenges to Globalization: Analyzing theEconomics
Volume Author/Editor: Robert E. Baldwin and L. Alan Winters,editors
Volume Publisher: University of Chicago Press
Volume ISBN: 0-262-03615-4
Volume URL: http://www.nber.org/books/bald04-1
Conference Date: May 24-25, 2002
Publication Date: February 2004
Title: The Cross-Border Mergers and Acquisitions Waveof the Late 1990s
Author: Simon Evenett
URL: http://www.nber.org/chapters/c9545
11.1 Introduction
As nations’ markets continue to become more closely integrated throughthe process commonly referred to as globalization, a concern has arisen bothpopularly and among policy makers about the consequences for the degreeof competition between firms. Critics of globalization often charge that it ex-tends the reach of abusive oligopolies and monopolies,1 and policymakers indeveloping countries worry whether or not increased openness to trade andforeign-direct-investment flows makes them more vulnerable to “exploita-
411
11The Cross-Border Mergers andAcquisitions Wave of the Late 1990s
Simon J. Evenett
Simon J. Evenett is a university lecturer at the Said Business School, Oxford University, andfellow of Corpus Christi College, Oxford.
I am grateful to Benno Ferrarini for his tenacious efforts to obtain data for this paper.Thanks also to seminar participants at INSEAD for some tough questions and constructivesuggestions. Joshua Aizenman, Robert Baldwin, Jean Dermine, Rod Falvey, Rachel McCul-loch, Matt Slaughter, Daniel Traca, Tony Venables, Xavier Vives, and Alan Winters providedmany much appreciated pointers and suggestions. This paper was presented at both meetingsof the International Seminar on International Trade, jointly organized by the Centre for Eco-nomic Policy Research and the National Bureau of Economic Research.
1. See, for example, the following remarks by Mr. Martin Khor, Director of the ThirdWorld Network, to the opening session of the UN”s Millennium Forum on 22 May 2000.
Our age is also defined by the process of globalisation. There are different approaches tothis phenomenon. Some say it is inevitable and basically good, you just have to adjust to itand learn to reap the benefits. Others worry about the costs and advocate some safety netsto catch the losers as they fall. In truth, the essence of globalisation is the push by big com-panies and financial institutions to have more power, to grow bigger through taking overothers, and make more profits. They have lobbied their governments, of the rich countries,to break down the national barriers that prevent them from totally free access to marketsacross the world, especially in the developing countries.
The text of this speech can be downloaded from http://www.twnside.org.sg/title/mk7.htm.
tion” by multinational firms.2 Such policymakers wonder if they have—orcan ever have—the national tools to tackle private anticompetitive practices.3
There is also a vibrant debate about the potential for international ac-cords on competition law and enforcement. Policymakers worldwide areengaged in discussions about the desirability and viability of a multilateralframework on competition policy under the auspices of the World TradeOrganization (WTO).4 Proponents of such a framework have called for dis-ciplines on so-called hard-core cartels, so-called core principles for com-petition law and enforcement, modalities for voluntary cooperation, andfor the progressive strengthening of competition-policy-related institu-
412 Simon J. Evenett
2. See, for example, the following statement in a November 1998 submission by the Gov-ernment of India to the World Trade Organization’s Working Group on the Interaction Be-tween Trade and Competition Policy.
In contributions of intergovernmental organizations, a dominant theme along with the is-sue of mergers and acquisitions is the issue of contestability of markets. Although notclearly defined, an impression is created that every aspect of domestic government policy,economic and social—would, in one way or the other, affect fair trade and the contesta-bility of markets. In a more concrete sense this debate on contestability of markets has beenwitnessed during the so-called Structural Impediments Initiative in the US-Japan context.With developing countries, the dangers of the doctrine of contestability of markets erod-ing their ability to take domestic social and economic action are even greater. Moreover, inthe name of contestability, an increase in market access for MNCs [multinational corpo-rations] may be sought by suggesting that all sectors of WTO, in one way or another, be putto the test of contestability. This may have implications for services, intellectual propertyrights, subsidies and a host of other areas, not to mention investment. It will, therefore, benecessary to define it clearly and narrowly in relation to specific issues and disciplines thatwe wish to address in the WTO regime. Some issues to be addressed would be market al-location, refusal to deal (boycott), price fixing, collusive dealing, and differential pricing(all of which are vertical RBPs [restrictive business practices]). All of these practices dis-tort or restrict trade and affect the international contestability of markets. This action isparticularly called for as developing country markets and their commercial entities aremore vulnerable to the effects of such RBPs and at their receiving end. Experiences withRBPs encountered by developing country firms in developed country markets illustratehow RBPs by the large MNCs put these firms at a competitive disadvantage. Instances ofother so-called privately led restrictive business practices such as debarring Indian partic-ipation in the Dutch Flower Auction or the Basle Jewellery and Watch Fair are also rele-vant.
This text was taken from paragraph two of WTO document number WT/WGTCP/W/111,which can be downloaded from the WTO’s website (http://www.wto.org). See also the ex-amples described in Mehta and Nanda (2003).
3. A recent study of the experience in implementing competition law in seven developingcountries offered the following remark about the ability of these countries’ antitrust enforcersto address international mergers and acquisitions and anticompetitive practices.
Whether countries have special provisions for extra-territorial jurisdiction or apply the“effects” doctrine is not important when they have no means to enforce their decisions. Of-ten the companies involved are beyond the reach of the competition agencies, which alsocauses problems in obtaining the information necessary to make a decision. (ConsumerUnion Trust Society [CUTS] 2003, 75)
4. For an excellent overview of the discussions within the WTO’s Working Group on the In-teraction Between Trade and Competition Policy, see that Working Group’s Annual Reportfor 2002 (WTO 2002).
tions in developing countries.5 Others argue for the development of bestpractices for competition law and enforcement in fora such as the Interna-tional Competition Network and the Organisation for Economic Co-operation and Development (OECD).6 And, others have called on indus-trialized economies to tackle the alleged anticompetitive practices of theirmultinational firms in developing economies. This proposal would involveantitrust enforcement officials expanding their traditional concern aboutharm done within their jurisdiction to harm done abroad. It is argued thatsuch an approach would reduce the outlays on antitrust enforcement bydeveloping economies.7
In principle, integrating national markets both reduces and enhancesthe opportunities and viability of anticompetitive conduct by private firms.On the one hand, as countries open up their domestic markets to foreigncompetition by reducing their tariffs and other trade-distorting policies,domestic incumbents that have been protected from international compe-tition by these trade barriers are now more likely to be forced to abandontheir price-raising and anticompetitive practices.8 Moreover, the increasedopportunities for international mergers and acquisitions can bring cost-reducing efficiencies that may be passed on to customers, be they privateconsumers, firms, or governments. On the other hand, globalization alsopresents new opportunities for firms to form hard-core cartels9 with inter-national reach and other various anticompetitive arrangements. Thus,whether globalization promotes or reduces competitive behavior, on bal-ance, is largely an empirical rather than theoretical issue.
In this chapter, I first describe in considerable detail the nature of thewave of cross-border mergers and acquisitions (M&A) that occurred dur-ing the period of rapid globalization in the 1990s and then focus on oneparticular service sector, namely banking, to investigate if there is evidence
The Cross-Border Mergers and Acquisitions Wave of the Late 1990s 413
5. The European Commission is one of the leading proponents of such a framework. Itsproposals can be downloaded from the WTO’s website (http://www.wto.org). The Commis-sion has further clarified its proposals in discussions at the WTO’s Working Group (see WTO2002). The doubts of critics and skeptics are also reported in WTO (2002). For an analysis ofthe implications of such a framework for the design and implementation of national compe-tition law, for industrial policy and development policy options, and for the resource costsfaced by developing countries, see Evenett (2003a).
6. For several proposals on best practices in the merger-enforcement area, see the contri-butions to Rowley (2002). More generally, discussions on best practices in competition lawand enforcement are undertaken often in the OECD’s Competition Committee. Many of therelevant documents can be found at http://www.oecd.org/EN/document/0,,EN-document-768-nodirectorate-no-22-20233-768,00.html. A number of interesting and informative docu-ments on best practices in merger review can be found on the website of the mergers workinggroup of the International Competition network (http://www.internationalcompetitionnet-work.org/wg1.html).
7. See Hoekman and Mavroidis (2002).8. For a classic statement of this perspective, see Bhagwati (1968).9. For evidence on private international cartels see Evenett (2003a), Levenstein and Suslow
(2001), and OECD (2003).
that cross-border M&A in this industry resulted in greater spreads betweenthe interest rates paid by borrowers and those rates paid to depositors. Ofcourse, there are limits to what can be learned from a single sector study,but hopefully this analysis will contribute to the factual record and to theliterature on consolidation in the banking sector, as well as shedding lighton the importance of a number of factors that should be considered whencoming to a view on the welfare consequences of the latest wave of cross-border mergers and acquisitions.
My analysis yields several findings. First, the recent cross-border M&Awave is in real terms at least five times larger than its predecessor in the1980s. Even after correcting for the rising price of financial assets,10 in thislatest wave of cross-border M&A is much much larger. Second, althoughthe latest wave involved firms from more countries than in the 1980s, theoverwhelming bulk of such M&A still took place among the members ofthe OECD. Third, despite its greater scale in real terms, the latest waveof cross-border M&A represents purchases of only a small fraction of thepublicly traded corporate assets in industrial economies, especially in theGroup of Seven (G7) leading industrial economies. Foreigners are, there-fore, not taking over large tranches of national economies through cross-border M&A. Fourth, the preponderance of cross-border M&A in the late1990s were in service sectors, many of which are pretty much immune toimport competition.
Fifth, in one important service sector—banking—estimating the effectsof cross-border mergers and acquisitions requires paying careful attentionto sample composition. Furthermore, controlling for changes in regula-tory regimes and other changes in market structure in banking are impor-tant. Of the thirteen OECD nations’ banking sectors considered here, eightare members of the European Union (EU). The determinants of the latters’banking spreads during the 1990s are found to be much different fromthose in non-EU economies. In the banking sectors of EU member states,domestic M&A and strategic alliances are found to have no net effect onbank spreads. Cross-border mergers and acquisitions are found to depressspreads, suggesting that substantial efficiencies resulted from such consol-idation. In contrast, the evidence suggests that cross-border strategic al-liances result in higher spreads—a finding that is consistent with the viewthat some such alliances have been formed to forestall further market inte-gration and to preserve the independence of banks in Europe.
The parameters in the non-EU sample are less precisely estimated, re-flecting in large part a smaller number of observations. Only cross-borderstrategic alliances are found to influence bank spreads in a statistically sig-nificant manner—in this case depressing them (which is the opposite of myfinding in the EU sample). Nevertheless, taken together, this chapter’s re-
414 Simon J. Evenett
10. As proxied for by national stock-market indexes, see following discussion.
sults for the banking section imply that it is hazardous to make sweepinggeneralizations about the net effect of cross-border transactions, especiallyas the latter can have both procompetitive and anticompetitive effects.
Sixth, the estimated parameters are used to forecast the net effect of allof these domestic and cross-border interfirm agreements on bank spreadsin each of the thirteen countries considered in my EU and non-EUsamples. In each EU member state, the combined effect of cross-border in-terfirm agreements on interest-rate spreads is an order of magnitude largerthan for domestic interfirm agreements. Moreover, the overall beneficialeffect of cross-border M&A in banking11 in the EU has, in all of the eightEU members considered here, been completely reversed by the harm doneby cross-border strategic alliances. This implies that the combined effect ofthe latter may not be as benign or as inconsequential as they first appear.12
Moreover, as the number of cross-border strategic alliances in bankingin the EU appears to have increased considerably after the cross-borderM&A spurt began, my findings are consistent with the explanation thatbanks eventually took rearguard actions to increase their market power af-ter the spread-reducing effects of efficiency-enhancing cross-border merg-ers and acquisitions were felt. If this view is correct, then regulators in thebanking sector and competition policy officials should not focus solely onthe potential consequences of mergers and acquisitions and should keep abeady eye on perhaps more innocent-looking public announcements ofstrategic alliances.
This paper is organized as follows. The next section describes the recentwave of cross-border mergers and acquisitions. The third section focuseson the consolidation in the banking systems in thirteen industrializedeconomies, establishing the factual record first and then conductingeconometric analyses. The final section contains some concluding re-marks.
11.2 The Cross-Border Mergers and Acquisitions Wave of the Late 1990s
11.2.1 Preliminaries
Before turning to the factual record, it may be helpful to clarify the termsused in this chapter. An important distinction is between foreign direct in-vestment (FDI) and cross-border mergers and acquisitions. As the princi-pal source of data on cross-border M&A used here is the United NationsConference on Trade and Development’s (UNCTAD’s) annual World In-
The Cross-Border Mergers and Acquisitions Wave of the Late 1990s 415
11. This is not to say that every cross-border merger or acquisition in the banking sectorgenerates enough efficiencies that bank customers benefit.
12. This is not say that every cross-border strategic alliance detrimentally affects the wel-fare of bank customers.
vestment Report, I reproduce below UNCTAD’s description of the differ-ence between cross-border M&A and FDI.
A firm can undertake FDI in a host country in either one of two ways:greenfield investment in a new facility or acquiring or merging with anexisting local firm. The local firm may be privately or state owned: pri-vatisations involving foreign investors count as cross border M&As,which entails a change in the control of the merged or acquired firm. Ina cross border merger, the assets and operation of the two firms belong-ing to two different countries are combined to establish a new legal en-tity. In a cross border acquisition, the control of assets and operations istransferred from a local to a foreign company, the former becoming anaffiliate of the latter. (UNCTAD 2000, 99)
Although this quotation clarifies the distinction between investments innew productive entities and investments in existing entities it would be in-correct to infer that, in practice, the reported value of cross-border M&Atransactions is always less than the reported amount of FDI. In fact, mea-sured cross-border M&A received by a nation is taken to be the sum of (a)foreign investments in existing domestic firms that result in equity stakesgreater than 10 percent, (b) foreign investments in existing domestic firmsthat result in equity stakes less than 10 percent, and (c) foreign investmentsin existing domestic firms that are paid for using capital or funds raised inthe nation of the acquiring firm. In contrast, the reported amount of FDIreceived by a nation includes (a) and (c), plus the value of overseas invest-ments paid for by reinvested earnings of foreign firms already resident inthe nation. Consequently, as UNCTAD (1996) notes,
It is, therefore, possible to witness a large increase in M&As that is notfully reflected in FDI flows . . . [and] . . . movements in FDI flows cantake place independently of movements in M&A. In practice, however,there is a close relationship between movements in M&As and FDIflows. (UNCTAD 1996, box I.1).
To underscore the differences between measured cross-border M&Aand FDI into industrial countries, table 11.1 reports the ratio of the formerto the latter in thirteen OECD nations during 1995 to 1999. In some coun-tries (Australia, France, Japan, and Spain), the ratio is far from 1—sug-gesting that recorded cross-border M&A and FDI differ markedly.
In collecting data on cross-border M&A, the source used by UNCTADattempts, whenever possible, to establish the location of the “ultimate”corporate owner of a given firm, not an “intermediate” owner that mayalso be owned by another firm. This is done by examining newspaper an-nouncements of actual and proposed transactions complemented by theuse of databases that identify which firms own other firms. By locating theheadquarters of an ultimate corporate owner, one can assign a nationalityto the owner. This, of course, sidesteps the fact that a publicly traded com-
416 Simon J. Evenett
The Cross-Border Mergers and Acquisitions Wave of the Late 1990s 417
Table 11.1 Ratio of Inward M&A Flows to Inward FDI Flows for 13 OECD Economies
Economy 1995 1996 1997 1998 1999 Mean ratio
Spain 20.40 22.22 63.91 48.05 56.14 42.14France 31.81 61.82 76.59 57.25 59.02 57.30Sweden 65.39 76.19 30.35 56.71 99.42 65.61The Netherlands 29.52 23.51 131.73 46.44 113.95 69.03Belgium and Luxembourg 18.62 63.82 78.65 30.41 153.98 69.10The United States 90.58 80.60 77.46 112.47 84.57 89.14Canada 124.95 112.48 72.36 75.71 99.07 96.92Switzerland 166.08 143.18 53.42 71.25 120.54 110.89Germany 62.34 181.44 106.84 90.00 156.36 119.39Italy 84.72 77.95 90.86 146.17 225.24 124.99The United Kingdom 182.24 127.98 119.50 143.10 152.59 145.08Australia 140.27 213.79 191.33 232.26 192.77 194.09Japan 1387.18 859.50 96.34 126.00 124.46 518.70
Weighted mean (across economies) 84.60 87.16 86.75 96.89 102.75
Coefficient of variation 4.32 2.51 0.47 0.58 0.48
Source: UNCTAD (2000, appendixes).
pany may have shareholders or stockholders who are resident in more thanone country—a wrinkle that is easy (and important) to state but is difficultto address adequately.
11.2.2 Factual Record
Turning now to the data, using 1987 constant dollars, table 11.2 and fig-ure 11.1 report the extent of cross-border mergers and acquisitions activityfrom 1987 to 2000, the peak year of the latest boom.13 (In 2001, reports sug-gest that cross-border M&A fell 40 percent in nominal terms.) As figure11.1 makes clear, the recent wave of cross-border M&A accelerated after1996 and reached a peak of $828 billion in 2000 (which is equivalent to $1.1trillion dollars in year 2000 dollars). The previous wave of cross-borderM&A, which took place from 1987 to 1990, reached a peak of $135 billionin 1990—less than one-fifth of the peak in the latest wave. Furthermore,developing economies played next to no role in the 1980s wave and a mod-est role in the most recent wave.14 Perhaps for this reason, it might be moreaccurate to call the latest wave an international wave, rather than a globalwave, of cross-border M&A.
For further perspective on the growth of cross-border M&A in the
13. For two descriptions of the factual record that include more discussion than is pre-sented here of mergers and acquisitions in selected sectors, see Kang and Johansson (2000)and OECD (2001). For a recent account and analysis of foreign mergers and acquisitions inthe United States, see Feliciano and Lipsey (2002).
14. Having said that, see Mody and Negishi (2000) for an account of the growing role ofcross-border M&A in overseas investments in the East Asia in the late 1990s.
Tab
le 1
1.2
Tota
l Cro
ss-B
orde
r M
erge
rs a
nd A
cqui
siti
ons
1987
–200
0, C
onst
ant 1
987
U.S
.$ b
illio
ns
Yea
r
Cla
ss o
f Eco
nom
ies
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
All
74.5
111
1.81
130.
7613
5.00
69.8
466
.95
68.5
010
2.65
147.
4417
5.89
232.
0640
0.02
567.
5982
8.43
Dev
elop
ed c
ount
ries
71.8
710
9.67
126.
4712
8.40
67.1
862
.86
59.7
994
.16
137.
2715
3.61
207.
0838
4.81
523.
4879
2.38
Dev
elop
ing
coun
trie
s2.
612.
113.
726.
312.
654.
088.
618.
2110
.10
21.7
924
.77
14.4
542
.75
30.5
2
Sou
rce:
UN
CT
AD
(var
ious
yea
rs).
1990s, see figure 11.2. This shows that the real growth of cross-borderM&A dwarfs that of world GDP and of world merchandise trade, the lat-ter of which almost doubled in real terms in the 1990s. In figure 11.2, I de-flated current values of total cross-border M&A by the same gross domes-tic product (GDP) deflator that I used to compute real world GDP—aprocedure which can be objected to on the grounds that stock markets
The Cross-Border Mergers and Acquisitions Wave of the Late 1990s 419
Fig. 11.1 The latest wave of cross-border M&A (1997–2000) is much larger thanits predecessor (1987–1990)
Fig. 11.2 The real increase in cross-border M&A throughout the 1990s dwarfs thatof world trade and GDP
soared in the 1990s, raising the possibility that the price of financial capi-tal has grown more quickly than the GDP deflator. To examine this matterfurther, I deflated country-by-country values of nominal inward cross-border M&A by the changes in the value of each country’s major stock-market index,15 and normalized the amount of cross-border M&A receivedin 1990 at 100. (The year 1990 was the peak of the wave of cross-borderM&A that started in the late 1980s.) Figure 11.3 reports this new calcula-tion of the real value of cross-border M&A received by the ten industrial-ized economies throughout the 1990s. In all but two economies, real in-ward M&A is much lower in 1990 than in 2000, confirming that, for the
420 Simon J. Evenett
15. For nine of the ten industrialized economies, choosing the major stock-market indexwas straightforward. For the United States, however, one could choose either the Standard &Poor’s (S&P) 500 index or the Dow Jones Industrial Index. I chose the latter index, but notethat both indexes rose by similar percentages throughout the 1990s.
A
B
Fig. 11.3 Comparing inward M&A across booms: A, Economies with relativelymoderate increases; B, Economies with large increases
major markets in the world economy, the latest cross-border M&A wavewas on a much larger scale than its predecessor in the 1980s.
Having said that, the growth of cross-border M&A is from a relativelysmall base and, when the level of cross-border M&A that a nation receivedin the late 1990s is compared to its stock market’s capitalization, theamount of assets acquired by foreign firms tends to be quite small (see table11.3). Only the smaller—and relatively more open—industrial economiessaw the total value of foreign mergers and acquisitions exceed 5 percentof their total stock-market capitalizations. For the G7 leading industrialeconomies, the inflows of cross-border M&A are even smaller relative tothe size of their stock markets. The image of aggressive foreign executivessnapping up large shares of productive domestic assets conjured up duringthe contentious merger of Vodafone and Mannesmann AG in 2000, for ex-ample, finds little support in the data.
Figures 11.4 and 11.5 provide further indications of the broader partici-pation in the latest wave of cross-border M&A, compared to its predeces-sor in the 1980s. The latter was essentially an American and British affair,with some French firms making acquisitions towards the end of the boom
The Cross-Border Mergers and Acquisitions Wave of the Late 1990s 421
Table 11.3 Total Value of Annual Cross-Border M&A Deals as a Percentage ofStock-Market Capitalization
1980s Wave 1990s Wave
Economy 1988 1989 1990 Mean 1997 1996 1999 Mean
Luxembourg 0.01 0.00 5.08 1.70 10.30 0.10 20.48 10.29Sweden 0.19 1.55 4.58 2.11 1.22 3.98 15.99 7.06Belgium 1.35 1.08 6.83 3.08 4.34 2.79 13.51 6.88Norway 1.67 2.38 2.56 2.20 4.00 2.10 13.66 6.59New Zealand 10.03 5.00 41.92 18.98 4.41 9.28 5.64 6.44Austria 2.85 0.14 1.65 1.55 6.32 10.41 1.15 5.96The Netherlands 1.04 2.51 1.24 1.60 4.06 3.21 5.61 4.30Australia 3.17 3.34 2.34 2.95 5.00 4.48 2.80 4.10The United Kingdom 2.58 3.21 3.43 3.07 1.99 3.84 4.52 3.45Denmark 0.72 0.56 1.27 0.85 0.60 3.85 4.38 2.94Canada 3.61 3.57 2.37 3.19 1.50 3.02 2.99 2.50France 1.23 0.91 2.60 1.58 2.63 1.70 1.62 1.98Germany 0.52 1.18 1.75 1.15 1.44 1.74 2.76 1.98Finland 0.27 0.75 0.22 0.41 1.00 3.09 0.90 1.67Spain 0.79 1.30 3.44 1.84 1.40 1.42 1.35 1.39The United States 2.29 1.96 1.79 2.01 0.72 1.56 1.51 1.26Italy 2.29 1.77 1.46 1.84 0.98 0.79 1.54 1.10Switzerland 1.67 0.57 2.85 1.70 0.62 0.78 0.59 0.66Portugal 0.15 7.23 2.31 3.23 0.22 0.68 0.32 0.41Japan 0.00 0.04 0.01 0.01 0.14 0.16 0.36 0.22Greece 0.51 0.00 0.76 0.42 0.29 0.03 0.09 0.14
Note: Countries in bold are members of the Group of Seven Industrialized Nations (G7).
422 Simon J. Evenett
Fig. 11.5 The latest M&A wave involved more OECD nations
Fig. 11.4 Cumulative distribution of cross-border M&A in 1987–1990 and1997–2000
(principally in 1990). In contrast, the current wave involved considerabletransactions by German, French, Spanish, and Nordic firms that joined thelong standing Anglo-American interest in cross-border M&A. Figure 11.5compares the cumulative distribution of cross-border M&A across OECDnations in both waves, confirming the less skewed nature of the latest wave.
Another critical feature of the latest cross-border M&A wave is the im-portant role played by so-called megadeals, those transactions whose valueexceeded one billion U.S. dollars. The number of such deals nearly qua-drupled from 1996 to 2000 (see fig. 11.6), and the (constant dollar) valueof such transactions more than quadrupled (see fig. 11.7). In appendixtable 11A.1, I have listed the megadeals that were announced in 2000.
Fig. 11.6 The growing number of billion-dollar-plus M&A deals
Fig. 11.7 Mega deals drove the latest wave of cross-border M&A
It is evident that the majority of such deals involved the service sector, no-tably the financial and telecommunications sectors. Few manufacturingfirms can be found on this list, a point I shall return to below.
An examination of the sectoral breakdown of cross-border M&A dur-ing the 1980s and 1990s waves is revealing too (see table 11.4 and fig.11.8). One striking finding is the relatively smaller importance of manu-facturing cross-border M&A in the late 1990s, accounting for only 35.1percent of the total value of such transactions. In the previous wave, suchtransactions accounted for 62.2 percent of the total. What is more, just
424 Simon J. Evenett
Table 11.4 Sectoral Composition of Cross-Border M&A
Share of TotalCross-Border M&A
Sector/Industry 1987–1990 1997–2000
Primary 5.04 1.43Agriculture, hunting, forestry, and fishing 0.72 0.38Mining, quarrying and petroleum 4.32 1.04
Manufacturing 62.24 35.11Food, beverages, and tobacco 8.16 4.28Textiles, clothing, and leather 0.95 0.41Wood and wood products 3.93 1.72Publishing, printing, and reproduction of
recorded media 5.89 1.11Coke, petroleum, and nuclear fuel 9.38 5.33Chemicals and chemical products 12.17 6.70Rubber and plastic products 2.03 0.48Nonmetallic mineral products 2.30 1.39Metal and metal products 2.86 1.67Machinery and equipment 1.75 1.69Electrical and electronic equipment 8.14 5.44Precision instruments 2.20 1.21Motor vehicles and other transport
equipment 1.94 3.60Other manufacturing 0.53 0.11
Tertiary 32.72 63.46Electric, gas, and water 0.36 5.44Construction 0.46 0.38Trade 8.08 5.07Hotels and restaurants 3.77 0.82Transport, storage, and communications 1.84 21.94Finance 11.03 16.19Business services 4.39 9.44Public administration and defence 0.00 0.08Education 0.00 0.02Health and social services 0.17 0.20Community, social- and personal-service
activities 2.62 3.87Other services 0.01 0.01
Unknown 0.00 0.00
The Cross-Border Mergers and Acquisitions Wave of the Late 1990s 425
three service sectors (transport, storage, and communications; finance;and business services) account for just under one-half of total cross-borderM&A in the late 1990s.
11.2.3 Policy Regimes Facing Cross-Border Mergers and Acquisitions
Much has been made in the literature and in the reports of internationalorganizations16 of the falling barriers to greenfield FDI during the 1990s.
A
B
Fig. 11.8 Manufacturing dominated the 1987–1990 wave but services dominatedthe 1997–2000 wave: A, 1987–1990; B, 1997–2000
16. See, for example, World Bank (2000) and the annual World Investment Reports pub-lished by UNCTAD (various years).
The UNCTAD goes so far as to tally up, on an annual basis, the number ofeconomies that have relaxed or tightened their FDI regimes.17 However, inindustrialized economies (and in some developing economies too), cross-border mergers and acquisitions are typically influenced by two differentpolicy regimes: merger-review policies (which are described in some detailbelow) and sectoral regulations. The latter can involve reviews of M&Adeals (both domestic and cross-border) that occur within a given sector.Regulators in financial services, banking, telecommunications, and airtransportation have been active in the 1990s reviewing proposals to mergeor acquire firms. What is more, some jurisdictions allow for M&As in somesectors to be reviewed both by the relevant sectoral regulator and by the na-tional competition-enforcement agency.18 This raises the question of theextent to which observed levels of cross-border M&A are affected by thepotential for multiple official reviews within the same jurisdiction.
In contrast to policies toward greenfield FDI, it is quite possible that,as a general proposition, policies toward M&As have become more strin-gent throughout the 1990s. For starters, the number of jurisdictions withmerger-review regimes rose sharply in the 1990s (see fig. 11.9).19 According
426 Simon J. Evenett
17. See UNCTAD’s (various years) annual World Investment Reports for details.18. For examples, see the case studies in Evenett, Lehmann, and Steil (2000).19. Figure 11.9 reports not only the total number of merger review laws enacted since 1970,
but also the total number of such laws requiring notification of proposed mergers and acqui-sitions before deals are completed. Among legal practitioners and scholars, the latter type ofmerger-review regime is, by and large, regarded as the most stringent form of merger-reviewlaw (see ICPAC 2000 for a statement of what might be called conventional legal wisdom in thisregard). See, also, Evenett (2002), which confirms that, of the three main types of merger-review laws, those requiring mandatory prenotification curtail cross-border M&A the most.In the light of these remarks, it is noteworthy that a growing proportion of the merger-review
Fig. 11.9 The spread of merger-review laws 1970–2000
to White and Case (2001), a publication of an international law firm thatconducts an annual survey of merger enforcement around the world, sixty-five economies had merger review laws in 2000 (plus the European Com-mission’s supranational merger-enforcement regime). Thirty of thesemerger-review laws have been enacted since 1990. It is also noteworthy thatmerger-review laws are a relatively new phenomenon in some industrialeconomies; in other words, the spread in the last twenty years is not just aphenomenon found in developing countries. For instance, the EuropeanCommission’s merger regulation only came into force in 1990, Italy’smerger-review regime was enacted in 1990, Denmark’s and the Nether-lands’ in 1997, and France’s antitrust authority only celebrated its fifteenthbirthday in 2002. Finally, these remarks suggest that, when studying cross-border flows associated with corporate investments abroad, it is importantto locate which policy regime or regimes has the greatest bearing on theflows being examined. In many cases, measures of (or proxies for) thestrength of the policy regime towards greenfield investments may providea misleading guide to the strength of the merger-review regime or of thesectoral regulatory regime.
11.2.4 Commentary and Related Literature
The observed change in the sectoral composition of cross-border M&Areflects a number of factors. First, lower trade barriers and more intensecompetition in world markets for manufactures are likely to reduce theincentive to engage in cross-border M&A in order to accumulate marketpower or to jump tariffs. Indeed, any increments in market power are likelyto result in greater supplies from competitors located at home and abroad.This suggests the following hypothesis: In those industries where interna-tional competition is fiercest, M&A is more likely to be motivated by cost-cutting rationales. Second, the increase in service-sector M&A reflectsderegulation, privatization, and the relaxation on restrictions on foreignownership in many industrial economies. Although such reforms began inthe 1980s in a few industrial economies (notably Britain, New Zealand,and the United States), in many other countries they were not implementedon a wider scale until the 1990s. This is not to say that all the major servicesectors are deregulated, but rather that the pace of deregulation picked upin the 1990s and that this presented opportunities for foreign investors. Inmany continental-European economies, the pace gathered in response tothe Single Market Programme and the liberalization initiatives that en-sued.
Although the corporate-finance literature on the causes and financial
The Cross-Border Mergers and Acquisitions Wave of the Late 1990s 427
laws enacted in the 1980s and 1990s are of the mandatory prenotification type (see fig. 11.9).This is further evidence in favor of the proposition that the worldwide policy regime towardM&A has become stricter over time. (It may well be the case that the policy regimes towardsM&A in individual countries have been relaxed throughout the 1990s.)
effects of mergers and acquisitions is quite voluminous, there are relativelyfew papers on the determinants and consequences of cross-border M&A20
and on economic analyses of the policy regimes governing such cross-border transactions.21 Black (2000a,b) describes a number of political andeconomic factors that, in his opinion, account for the recent surge in cross-border M&A. He points to the “breakdown of the old antitakeover coali-tion” (Black 2000a, 10). Unions have weakened, and managers own morestock options, which ties their remuneration more closely to corporate per-formance—which, he claims, reduces the incentive to defend against thetakeover of a poorly performing firm. Lower inflation and a surging stockmarket, it is argued, have reduced the costs of financing M&A (althoughthis explanation surely applies to domestic M&A as well as to cross-borderM&A). Finally, Black notes that there is now less opposition to concen-trations of wealth and that integrating national markets have encouragedfirms to aspire to activities on a worldwide scale. Pryor’s (2001) focus, incontrast, is on documenting the consequences for the United States of therecent boom in domestic and cross-border M&A. He argues that suchtransactions have increased the concentration of manufacturing industriesin the 1990s and, in his opinion, can be expected to continue to do so in thefuture.
An econometric approach was taken in Evenett (2002, 2003b). Employ-ing a gravity-equation approach in both studies, Evenett estimated thecontribution of different factors to the value of the American outwardM&A that forty-nine foreign economies received in 1999, including theeffect of national merger-review regimes. In both studies, several nation-specific factors are found to be important determinants of cross-borderM&A, including the recipient nation’s gross domestic product, the dis-tance from the United States, the recipient nation’s corporate-tax rate andaverage tariff rate, and whether or not the recipient nation was once aBritish colony (and is, therefore, more likely to use English as the languageof business and to share a common law system with the United States).Evenett (2003b) also found that the presence of merger-review laws tendsto cut in half the amount of American M&A received. This constitutes asubstantial barrier to the international trade in corporate assets and isespecially important given that the 1990s saw more and more developingeconomies adopt merger-review laws—in particular, those developing na-tions that hoped to join the EU at some point in the future.
Evenett (2002) also found that the combined effect of merger enforce-ment by national authorities in the EU and by the European Commissioncurtailed American overseas M&A by the same percentage22 as compa-
428 Simon J. Evenett
20. This paucity of studies on cross-border M&A is to be contrasted with the voluminousliterature on FDI, which the earlier discussion suggests is a distinct but related phenomenon.
21. There are a number of legal analyses of the policy regimes influencing cross-bordermergers and acquisitions.
22. In this case, fifty percent.
rable non-European merger enforcement agencies. This finding may be ofinterest in the light of the sharp transatlantic dispute over the proposedmerger between General Electric and Honeywell in 2001, in which accu-sations were made that the European merger authorities discriminatedagainst proposed American mergers.23
The economic impact of cross-border M&A depends on a number ofconsiderations that make it unlikely that sweeping claims can be made withany confidence about the desirability (or otherwise) of such internationaltrade in corporate assets. By reducing the number of firms that supply amarket, cross-border M&As may enhance the market power of the surviv-ing firms. However, such changes in ownership may also result in the com-bined entity attaining greater economies of scale and scope, which, in turn,may benefit consumers in the form of lower prices, a wider range of servicesoffered, or higher-quality goods and services. One mechanism often-mentioned is that foreign firms transfer so-called cutting-edge technol-ogies and better managerial practices to domestic firms that they havemerged with or acquired—suggesting that the beneficial effects of mergersand acquisitions could be greater in the cross-border case compared to adomestic transaction. However, there are no guarantees that these pro-competitive aspects of cross-border M&As will necessarily completelyoffset any anticompetitive effects of such transactions.24
The strength of each of these considerations is likely to vary from indus-try to industry. For example, as noted above, those sectors that face ag-gressive import competition are ceterius paribus less likely to see cross-border M&A result in higher prices. In sectors such as banking, wherefirms increasingly offer a wide range of financial products to customers,gains are likely to occur when mergers take place among financial institu-tions that sell complementary products. Another sector, telecommunica-tions, has seen rapid technological progress in the 1990s, and cross-borderM&As are often mentioned as one of the conduits by which such innova-tions are diffused across national borders—along with the managerialpractices that are needed to make good the profitable opportunities createdby these technological improvements. In terms of general findings, there-
The Cross-Border Mergers and Acquisitions Wave of the Late 1990s 429
23. Note that this finding in Evenett (2002) does not speak to the issue as to whether ECmerger enforcement procedures tends to discriminate more against transactions involvingAmerican firms than transactions involving non-American firms.
24. One important—and contentious—issue is to what extent ownership changes areneeded to secure the procompetitive benefits of mergers and acquisitions. Direct contractingand collaborative (or so-called strategic) alliances may provide the means by which a domes-tic firm can market a foreign firm’s range of products, or by which a domestic firm can expandits output (potentially reaping economies of scale) by producing goods under contract for aforeign firm. This raises the possibility that all the resource-allocation benefits of cross-borderM&As can be obtained by signing interfirm agreements that do not involve reducing the num-ber of suppliers. However, the point need not to be taken too far because transactions-costsarguments often point to the need for cross-holding of equity to attenuate incentive problems.Furthermore, members of an interfirm alliance or contracting, that starts off with procom-petitive effects, may well soon figure out how to turn their collaboration to price-raising ends.
fore, a sector-by-sector evaluation of the effects of cross-border M&A isprobably the most one can ever realistically expect, and, in the next section,I attempt such an evaluation of the recent consolidation in the banking sys-tem in thirteen OECD nations.
A final point, whose implications tend to be thought through in manyother international economic policy matters but which has, until now, re-ceived less attention in discussions of international-antitrust matters, isthat cross-border M&A may well have economic effects that spill across na-tional borders, and that national antitrust or competition authorities tendto focus only on the effects within their own jurisdictions. Therefore, nogovernment entity exists to aggregate the effects of a proposed transactionacross all the affected national markets.25 This may lead to situations wherea transaction is vetoed in some jurisdictions (where the economic conse-quences are thought to be adverse), even though there is a positive effect onnet across all the affected markets.
Essentially, the absence of any compensation mechanism between statesimplies that multiple national vetoes can lead to suboptimal enforcementof cross-border mergers and acquisitions. In recent years, a leading an-titrust American official has given attention to the issue of multiple na-tional vetoes (see Muris 2001), but the importance of the lack of any com-pensation mechanism for resource misallocation has yet to receive muchattention in legal and economic discourse on merger reviews. Indeed, theabsence of such a mechanism is one of the key characteristics that differ-entiates the international effects of the national antitrust enforcement fromtrade-policy negotiations. In the latter, it has long been understood thatany losses to a nation in one sector are compensated for by concessions inother sectors by trading partners. Without suggesting that cross-sectoraltrade-offs are the optimal means to conduct multijurisdictional merger re-views, there is probably some value in thinking through the implications ofcompensation mechanisms across merger cases that prevent a proposedmerger or acquisition, whose worldwide total effects are welfare improv-ing, from being blocked by a single jurisdiction in which it is thought thatthe transaction’s effects are adverse.26
11.3 Consolidation of the Banking Systems in Thirteen Industrial Nations
I now turn to an econometric evaluation of the effects of cross-bordermergers and acquisitions in the banking systems of thirteen industrialeconomies. When conducting such evaluations, the importance of control-ling for changes in regulatory structure, for sample composition, and for
430 Simon J. Evenett
25. Within the EU, for example, the European Commission could play such an aggregatingrole. This is not to say that it does play such a role!
26. For more discussion on the potential for resource misallocation in multijurisdictionalmerger review, see Evenett (2003c) and Neven and Roller (2001).
other determinants of market structure in the banking sector—such as do-mestic M&As, domestic entry and exit of banking, and the formationof joint ventures and strategic alliances between banks—will become evi-dent. But, first, I review the facts on banking consolidation as presented intables 11.5 and 11.6, which were assembled from a detailed report on bankconsolidation during the 1990s that was published by the Bank of Interna-tional Settlements (BIS 2001). This report referred to consolidation in thir-teen OECD nations, namely, Australia, Belgium, Canada, France, Germany,Italy, Japan, the Netherlands, Spain, Sweden, Switzerland, the UnitedKingdom, and the United States.
During the 1990s, these thirteen OECD economies experienced 3,563mergers and acquisitions that involved a domestic bank and another do-mestic bank. This domestic consolidation dwarfed in number (and invalue) the amount of cross-border M&A in banks (which totaled 338 trans-actions worth, in current dollars, approximately $73 billion; see table 11.5).What is more, many banks engaged in joint ventures and in strategic al-liances during this period, particularly in the United States, Japan, andCanada (table 11.6). In short, cross-border M&A was not the only factorinfluencing the concentration and the market structure of these nations’banking systems.
Research on banking mergers points to a number of rationales for thisobserved consolidation. Carow and Kane (2002), for example, point to thefollowing potential benefits to firms of such mergers and acquisitions: cost-based economies of scale, brand-based economies of scale, revenue-basedeconomies of scale, safety-net-based economies of scale, revenue-basedeconomies of scope, X-inefficiency, market power, and managerial-agencycosts (Carow and Kane 2001, table 1). Dermine (1999), whose analysisCarow and Kane developed, noted that the following attractions to bankM&As have been asserted in the literature: first, size can bring “defensebased economies of scale,” that is, “achieving size . . . that acts as a defen-sive measure against takeovers” (Dermine 1999, 16), and, second, the long-standing “quiet life” hypothesis. Moreover, strategic alliances also cangenerate cost efficiencies to the extent that alliance partners can reduce anyduplication in distribution networks.
My interest here is in the market power and efficiency-related aspects ofbank mergers and acquisitions. In particular, I focus on the effects on oneimportant observable variable, the interest-rate spread, which is the differ-ence between the interest rates paid by borrowers and those paid to depos-itors. Part of that spread will be determined by the costs associated withcollecting deposits, but also by the costs associated with locating andscreening potential borrowers. Another determinant of the spread is mar-ket power, and this depends on the number of options available to both de-positors and the borrowers. If potential depositors have few choices as towhere to place their savings, then incumbent banks can offer lower deposit
The Cross-Border Mergers and Acquisitions Wave of the Late 1990s 431
Tab
le 1
1.5
Mer
gers
and
Acq
uisi
tion
s in
the
Ban
king
Sec
tor
in 1
3 O
EC
D N
atio
ns d
urin
g th
e 19
90s
Type
of T
rans
acti
onC
hara
cter
isti
cs19
9019
9119
9219
9319
9419
9519
9619
9719
9819
99To
tal
Dea
ls C
lass
ified
by
Cou
ntry
and
Sec
tor
of S
ellin
g F
irm
Wit
hin
bord
er/W
ithi
n in
dust
ryN
umbe
r13
924
431
839
043
343
539
542
541
736
73,
563
Tota
l val
ue16
.77
27.7
423
.65
26.6
831
.02
122.
3538
.92
172.
0425
7.25
241.
1195
7.53
Mea
n va
lue
0.18
0.22
0.14
0.10
0.10
0.43
0.15
0.53
0.78
0.98
0.39
Wit
hin
bord
er/C
ross
indu
stry
Num
ber
3739
4045
5958
5371
6279
543
Tota
l val
ue10
.66
3.00
0.92
1.44
1.54
4.79
1.65
4.21
99.5
38.
2713
6.03
Mea
n va
lue
0.48
1.36
0.05
0.06
0.06
0.17
0.06
0.11
2.21
0.16
0.44
Cro
ss-b
orde
r/W
ithi
n in
dust
ryN
umbe
r14
1814
1924
3021
3036
2923
5To
tal v
alue
2.34
0.56
0.23
1.16
1.85
8.51
3.17
5.70
13.4
813
.79
50.8
0M
ean
valu
e0.
390.
070.
080.
170.
150.
470.
290.
340.
750.
770.
43C
ross
-bor
der/
Cro
ss in
dust
ryN
umbe
r9
109
79
911
818
1310
3To
tal v
alue
1.27
0.23
1.85
0.42
0.15
0.59
2.63
5.12
2.77
7.10
22.1
4M
ean
valu
e0.
320.
050.
260.
110.
030.
100.
440.
640.
210.
650.
32
Dea
ls C
lass
ified
by
Cou
ntry
and
Sec
tor
of A
cqui
ring
Fir
mW
ithi
n bo
rder
/Wit
hin
indu
stry
Num
ber
139
244
318
390
433
435
395
425
417
367
3,56
3To
tal v
alue
16.7
727
.74
23.6
526
.68
31.0
212
2.35
38.9
217
2.04
257.
2524
1.11
957.
53M
ean
valu
e0.
180.
220.
140.
100.
100.
430.
150.
530.
780.
980.
39W
ithi
n bo
rder
/Cro
ss in
dust
ryN
umbe
r13
2522
3536
5260
4945
7240
9To
tal v
alue
0.25
1.13
0.52
4.49
0.77
2.09
5.06
20.3
45.
679.
7150
.02
Mea
n va
lue
0.04
0.16
0.09
0.20
0.04
0.09
0.16
0.60
0.20
0.19
2.20
Cro
ss-b
orde
r/W
ithi
n in
dust
ryN
umbe
r22
2019
2225
4434
4251
5032
9To
tal v
alue
2.83
0.37
0.99
1.28
1.65
10.2
55.
1210
.70
15.5
020
.26
68.9
5M
ean
valu
e0.
280.
060.
200.
140.
150.
380.
300.
510.
600.
610.
42C
ross
-bor
der/
Cro
ss in
dust
ryN
umbe
r6
87
79
2115
1715
1712
2To
tal v
alue
0.18
0.19
0.27
0.13
0.75
0.65
1.06
1.22
0.85
3.59
8.89
Mea
n va
lue
0.06
0.05
0.14
0.04
0.75
0.13
0.21
0.17
0.09
0.33
0.18
Not
e:To
tal v
alue
and
mea
n va
lue
are
in U
.S.$
bill
ions
. The
se m
agni
tude
s ar
e in
cur
rent
dol
lars
.
Tab
le 1
1.6
Join
t Ven
ture
s an
d S
trat
egic
Alli
ance
s in
the
Ban
king
Sec
tor
in 1
3 O
EC
D N
atio
ns d
urin
g th
e 19
90s
Eco
nom
yC
hara
cter
isti
cs19
9019
9119
9219
9319
9419
9519
9619
9719
9819
99To
tal
The
Uni
ted
Stat
esW
ithi
n bo
rder
2225
3648
8513
467
160
318
241
1,13
6C
ross
bor
der
2532
1211
2433
2842
7557
339
Tota
l47
5748
5910
916
795
202
393
298
1,47
5C
anad
a W
ithi
n bo
rder
55
01
37
311
2128
84C
ross
bor
der
35
14
35
69
2916
81To
tal
810
15
612
920
5044
165
Japa
n W
ithi
n bo
rder
42
54
54
14
2047
96C
ross
bor
der
79
25
46
417
6465
183
Tota
l11
117
99
105
2184
112
279
Aus
tral
ia
Wit
hin
bord
er0
33
512
215
1133
5214
5C
ross
bor
der
21
24
718
912
2142
118
Tota
l2
45
919
3914
2354
9426
3B
elgi
um
Wit
hin
bord
er0
00
01
11
11
16
Cro
ss b
orde
r1
12
13
11
02
315
Tota
l1
12
14
22
13
421
Fra
nce
Wit
hin
bord
er2
24
14
32
41
427
Cro
ss b
orde
r9
37
43
53
612
1163
Tota
l11
511
57
85
1013
1590
Ger
man
y W
ithi
n bo
rder
24
48
23
05
84
40C
ross
bor
der
37
16
56
24
166
56To
tal
511
514
79
29
2410
96It
aly
Wit
hin
bord
er1
213
22
20
11
327
Cro
ss b
orde
r4
29
42
41
108
852
Tota
l5
422
64
61
119
1179
(con
tinu
ed)
Tab
le 1
1.6
(con
tinu
ed)
Eco
nom
yC
hara
cter
isti
cs19
9019
9119
9219
9319
9419
9519
9619
9719
9819
99To
tal
The
Net
herl
ands
W
ithi
n bo
rder
02
22
13
11
12
15C
ross
bor
der
14
21
12
11
76
26To
tal
16
43
25
22
88
41Sp
ain
Wit
hin
bord
er0
02
22
00
01
29
Cro
ss b
orde
r4
85
25
22
25
540
Tota
l4
87
47
22
26
749
Swed
en
Wit
hin
bord
er2
00
00
01
00
03
Cro
ss b
orde
r1
20
01
01
04
413
Tota
l3
20
01
02
04
416
Swit
zerl
and
Wit
hin
bord
er1
11
15
30
00
416
Cro
ss b
orde
r2
10
03
00
23
314
Tota
l3
21
18
30
23
730
The
Uni
ted
Kin
gdom
W
ithi
n bo
rder
713
38
1139
1125
2947
193
Cro
ss b
orde
r11
157
517
2415
1638
6020
8To
tal
1828
1013
2863
2641
6710
740
1
rates which ceterius paribus raises spreads. Likewise, if potential borrow-ers have few alternatives to seeking funds from the incumbent banks, thenthe interest rate paid by the former will be higher, thus raising spreads.
In the absence of efficiencies, bank M&As can be expected to raisespreads as the number of banking options facing depositors and borrowersdeclines. Only if there is sufficient rivalry between banks after a merger takesplace will any efficiencies created by the merger be passed on to consumersin the form of lower spreads.27 It is an empirical question whether marketpower or efficiencies dominates. To date, the empirical literature on bankmergers is mixed on the relative importance of these two factors (see the dis-cussions in Berger et al. 2000; Calomiris and Karceski 2000; Vives 2001).
To estimate the effects on interest-rate spreads of the changes in the na-tional banking sectors documented in tables 11.5 and 11.6, I assembledfrom BIS (2001) and the World Bank’s World Development Indicators(WDI) an unbalanced panel comprising the thirteen nations in the BISstudy. The unbalanced nature of the panel resulted from the fact that insome countries the five firm-concentration ratios in the banking sectorswere not reported in the BIS study for every year from 1990 to 1999. TheBIS study provided annual data on the number of banks in each country,the number and types of strategic alliances, and the number and types ofM&A.
The dependent variable for this study—the interest-rate spread—wastaken from the WDI CD-ROM. This source defines the interest spread as“the interest rate charged by banks on loans to prime customers minus theinterest paid to by commercial or similar banks for demand, time, or sav-ings deposits” (WDI CD-ROM).28
The mean value of this spread for each economy is reported in table 11.7,which sorts the economies according to the annual average number ofcross-border mergers and acquisitions. The highest mean spread (6.35 per-cent) is in Germany and the lowest spread is in Canada (1.34 percent).Data on three macroeconomic series—GDPs, GDP-price deflators, andstock-market capitalization—used to form control variables (which are de-scribed later) was also assembled from the WDI. Both GDP growth andthe inflation rate are intended to proxy for the stage of the business cycle,whereas the size of a nation’s stock market is supposed to proxy for the ex-tent to which financial markets can act as an alternative source of financefor borrowers and as an alternative destination for personal savings.
The objective of the econometric strategy is to discern—after stripping
The Cross-Border Mergers and Acquisitions Wave of the Late 1990s 435
27. For a more sophisticated overview of the causes and consequences of market power inbanking, see Vives (2001, section 3).
28. Some seminar participants have questioned the accuracy of the WDI data on bankspreads. I checked other available series on bank spreads—specifically, those from the Inter-national Monetary Fund and the comprehensive DATASTREAM financial database—andfound that these confirmed the data on spreads reported in the WDI.
Tab
le 1
1.7
Sum
mar
y S
tati
stic
s fo
r th
e U
nbal
ance
d P
anel
Dat
a S
et
Mea
n V
alue
of A
nnua
l Obs
erva
tion
s
Stra
tegi
c A
llian
ces
M&
AIn
tere
st-R
ate
Yea
rs in
Fiv
e-F
irm
Num
ber
Wit
hin
Cro
ssW
ithi
nC
ross
Spre
adE
cono
my
Unb
alan
ced
Pan
elC
once
ntra
tion
Rat
ioof
Ban
ksB
orde
rB
orde
rB
orde
rB
orde
r(%
)
Can
ada
1990
–199
970
.961
.08.
48.
19.
80.
41.
34Ja
pan
1990
–199
830
.616
1.1
5.4
13.1
6.1
0.4
2.59
Swed
en19
90–1
998
80.2
196.
30.
31.
05.
00.
65.
85T
he N
ethe
rlan
ds19
90–1
999
77.8
172.
41.
52.
63.
21.
25.
03It
aly
1992
–199
932
.328
0.9
3.0
5.8
23.6
1.5
5.62
Spai
n19
90–1
997
45.8
317.
40.
83.
86.
41.
93.
16B
elgi
um19
90–1
998
58.9
321.
00.
82.
22.
42.
15.
14A
ustr
alia
1991
–199
871
.840
.111
.69.
37.
82.
44.
19G
erm
any
1990
–199
817
.439
69.7
4.0
5.6
16.6
2.8
6.15
Swit
zerl
and
1990
–199
753
.541
8.4
2.1
2.1
9.1
3.1
2.21
Fra
nce
1990
–199
766
.215
20.5
2.8
5.0
16.1
3.9
4.33
The
Uni
ted
Kin
gdom
1990
, 199
5–19
9844
.346
6.8
26.0
23.3
22.5
6.0
2.79
The
Uni
ted
Stat
es19
90–1
999
18.3
1239
2.1
113.
633
.928
3.6
7.5
2.73
out the variation created by the business cycle and any competition forfunds created by the stock market and by the impact of regulatorychanges—whether or not interest-rate spreads in the 1990s have been in-fluenced by the formation of the numerous strategic alliances and the con-summation of bank M&As. Of special interest is whether or not cross-border M&A and cross-border strategic alliances have different effectsfrom their domestic counterparts. So that my econometric estimates arenot determined entirely by the boom years of cross-border M&A (1997–2000), the data set used covers as much of the 1990s as the data sources em-ployed here would allow.
I proceed from a parsimonious specification to richer ones. The firstspecification purges the variation in bank spreads of variation associatedwith a set of macroeconomic controls and includes country-specific fixedeffects. The estimation equation is
(1) ln��11 �
�
D
Li
i
t
t
�� � ai � b� ln(Mit ) � εit ,
where
ln(Mit ) � b1 ln��GG
D
D
Pi(
P
t�
it
1)
�� � b2 ln��Pi
P
(t�
it
1)
�� � b3 ln(S Mit ) � b4 ln(t) � . . .
and
i � 1,..., N, N � 13;t � 1990,..., 1999;ai is a country-specific fixed effect for economy i;Lit is the prime rate paid to borrowers from banks in economy i in
year t;Dit is the interest paid to depositors in banks in economy i in year t;GDPit is the GDP of economy i in year t;Pit is the GDP deflator in economy i in year t; andSMit is the total stock-market capitalization of economy i in year t as a
percentage of GDPit .
The vector Mit includes the four macroeconomic controls previously out-lined plus the (six) two-way interaction between these four controls. Theparameter estimates, obtained by confronting specification (1) with thedata from my unbalanced panel of thirteen economies, account for 6.43 per-cent of the within variation, see table 11.8. The estimation procedure usedweighted least squares to take account of any country-specific (or group-wise) heteroskedacity.29
The Cross-Border Mergers and Acquisitions Wave of the Late 1990s 437
29. Specifically, the weight applied to each country’s data in a second-stage regression is theabsolute value of the estimate of the standard deviation of the residuals that were recoveredfrom an unweighted first-stage regression using ordinary least squares.
Tab
le 1
1.8
Est
imat
ing
the
Det
erm
inan
ts o
f Ban
k S
prea
ds in
all
13 O
EC
D N
atio
ns fr
om 1
990
to 1
999
Spec
ifica
tion
s
(2)
(3)
(4)
(5)
(6)
(7)
Par
amet
erP
aram
eter
Par
amet
erP
aram
eter
Par
amet
erP
aram
eter
Inde
pend
ent V
aria
ble
(1)
Est
imat
et-
rati
oE
stim
ate
t-ra
tio
Est
imat
et-
rati
oE
stim
ate
t-ra
tio
Est
imat
et-
rati
oE
stim
ate
t-ra
tio
Mac
roec
onom
ic c
ontr
ols
Incl
uded
Incl
uded
Incl
uded
Incl
uded
Incl
uded
Incl
uded
Incl
uded
Fiv
e-fir
m c
once
ntra
tion
ra
tio
0.00
702.
8769
0.00
883.
2230
Fiv
e-fir
m c
once
ntra
tion
of th
e va
riat
ion
asso
ci-
ated
wit
h th
e fo
llow
ing
inde
pend
ent v
aria
bles
0.
0088
3.22
300.
0085
3.06
640.
0098
4.19
620.
0072
2.41
83ra
tio
afte
r be
ing
purg
ed
Tota
l num
ber
of
stra
tegi
c al
lianc
es0.
0028
1.90
240.
0026
1.80
990.
0030
2.03
14To
tal n
umbe
r of
mer
gers
an
d ac
quis
itio
ns–0
.001
1–1
.039
6–0
.000
6–0
.596
4–0
.001
0–0
.948
4St
rate
gic
allia
nces
Dom
esti
c0.
0045
2.02
850.
0041
1.83
90C
ross
bor
der
0.00
200.
7445
0.00
020.
0902
Mer
gers
and
acq
uisi
tion
sD
omes
tic
0.00
301.
7634
0.00
392.
0781
Cro
ss b
orde
r–0
.002
8–1
.847
3–0
.001
2–0
.758
3To
tal n
umbe
r of
ban
ks–0
.006
7–1
.506
7–0
.004
9–1
.154
2–0
.005
4–1
.148
0C
ontr
ols
for
regu
lato
ry
Not
Not
Not
Not
Not
Not
chan
ges
incl
uded
incl
uded
incl
uded
incl
uded
incl
uded
incl
uded
Incl
uded
Wit
hin
R2
0.06
430.
0609
0.07
800.
0780
0.08
810.
1144
0.25
97N
o. o
f obs
erva
tion
s97
9797
9797
9797
Not
e: B
oldf
ace
indi
cate
s a
para
met
er e
stim
ate
that
is s
tati
stic
ally
diff
eren
t fro
m z
ero
on a
one
-tai
l tes
t.
Specifications (2) and (3) in table 11.8 include parsimonious controls forchanges in market structure. Specification (2) includes the logarithm ofthe five firm-concentration ratio as an independent variable. Specification(3) goes further and introduces as two additional distinct independentvariables the logarithms of (1 plus) the number of annual strategic alliancesand (1 plus) the number of annual M&As consummated since 1990. Bothspecifications yield the traditional finding that increases in the concentra-tion ratio raises interest-rate spreads. Specification (3) provides the first ev-idence that strategic alliances appear to raise interest-rate spreads, whereasM&As tend to have no statistically significant effect on them.
One objection to specification (3) is that the observed concentration ra-tio in a given year may well, in turn, be influenced by the number of strate-gic alliances and mergers and acquisitions that have occurred in the past orare taking place currently. Consequently, in addition to allowing for time-invariant country-specific determinants of concentration, I also purgedthe variation of the five firm-concentration ratio of the observed levels ofstrategic alliances and M&As.30 This purged concentration ratio was usedin specification (4) instead of the actual concentration ratio in specification(3). The upshot: precious little changes.31
Another objection to specifications (1) through (4) is that they do nottake into account the entry and exit of domestic banks that is independentof M&A. Specification (5) includes as an independent variable the loga-rithm of the number of banks in an economy. With this additional explan-atory variable, the effect of the concentration ratio on interest-rate spreadsstill has the correct sign and the parameter estimate on the strategic-alliance variable remains little changed. Entry of banks is found to depressspreads, but not in a statistically significant manner.
As the BIS data source enables me to differentiate between domestic andcross-border strategic alliances and between domestic and cross-borderM&A, I entered them as separate independent variables in specification(6). Interestingly, domestic M&A and domestic strategic alliances arefound to raise spreads, with the estimated parameter on the former 50 per-
The Cross-Border Mergers and Acquisitions Wave of the Late 1990s 439
30. Specifically, in specification (4), I regressed the concentration ratio on country-specificdummies and the logarithm of 1 plus the total number of strategic alliances and the totalnumber of mergers and acquisitions. Following standard procedures, the estimate of thepurged concentration ratio is the estimated residual of the regression described above in thisfootnote.
31. Note that in specifications (4) through (7) I purged the concentration ratio of country-specific fixed effects plus each of the M&A and strategic-alliance variables included in a givenspecification. Moreover, in specifications (5) through (7), I also purged the concentration ra-tio of the logarithm of the number of banks. In specification (7), I also purged the concentra-tion ration of the explanatory power of the dummies picking up changes in bank regulatoryregimes. In each specification, the goal of this purging procedure is to identify that compo-nent of the concentration ratio that cannot be attributed to the changes in national marketstructures in the banking sector, to national regulatory changes, or to other national charac-teristics that do not vary over the years of data in the sample (1990–1999).
cent larger than on the latter. In contrast, cross-border M&A does appearto reduce spreads. However, in specification (6) these findings do not sur-vive the inclusion of controls for regulatory changes in the thirteen OECDnations during the 1990s.32 Specification (7) includes these controls, andthe parameter on the cross-border M&A variable loses its significance.Nonetheless, the estimated parameters do suggest that domestic consoli-dation and strategic alliances in the banking system have raised spreadswhereas their cross-border counterparts do not.
The next step was to examine whether these qualitative findings held upto changes in sample composition. First, I eliminated each country one ata time from the sample and reestimated the parameters. The new parame-ter estimates varied little from the previous. Second, I eliminated the NorthAmerican economies (Canada and the United States) from the sample,again with little effect. Third, I eliminated Japan and Australia from thesample and found not much changed. This seemingly robust set of regres-sion findings was overturned when I split the thirteen nation sample into asample comprising of EU members and a sample comprising the rest. Ar-guably, the former’s banking sectors have been affected by the implemen-tation of two European Banking Directives (and other measures to en-hance the integration of European markets). Such considerations mayresult in banking consolidation in Europe that has different effects than inother parts of the industrialized world. Tables 11.9 and 11.10, which reportthe parameters estimated in table 11.8 for the eight-nation EU sample andthe five-nation non-EU sample, respectively, confirm that differences doexist between these samples.
In the EU sample, cross-border strategic alliances are found to increasespreads. Perhaps such alliances in Europe were formed to frustrate entryand segment markets, rather than to enhance economies of scale andscope. Interestingly, where EU banks have gone beyond such alliances andhave actually merged with banks located in another EU member, the evi-dence suggests that spreads do fall (see specification (7), table 11.9). In con-trast, domestic interbank alliances in EU member states appear to have noeffects on bank spreads—suggesting that any economies reaped are prob-ably offset by a diminution in competition.
The performance of the specifications in the non-EU sample is rathermixed. For sure, with the inclusion of the regulatory controls (in specifica-tion (7), table 11.10), over half of the variation in the dependent variableis explained. However, few of the market structure variables—such as thepurged concentration ratio—are found to have had a statistically signifi-cant effect on interest-rate spreads. This may reflect the fact that the de-grees of freedom in the sample are quite small (less than 30). Even so,
440 Simon J. Evenett
32. Table 11A.2 lists the major banking-sector-related changed identified in annex II.3 ofBIS (2001).
Tab
le 1
1.9
Est
imat
ing
the
Det
erm
inan
ts o
f Ban
k S
prea
ds in
8 E
U N
atio
ns fr
om 1
990
to 1
999
Spec
ifica
tion
s
(2)
(3)
(4)
(5)
(6)
(7)
Par
amet
erP
aram
eter
Par
amet
erP
aram
eter
Par
amet
erP
aram
eter
Inde
pend
ent V
aria
ble
(1)
Est
imat
et-
rati
oE
stim
ate
t-ra
tio
Est
imat
et-
rati
oE
stim
ate
t-ra
tio
Est
imat
et-
rati
oE
stim
ate
t-ra
tio
Mac
roec
onom
ic c
ontr
ols
Incl
uded
Incl
uded
Incl
uded
Incl
uded
Incl
uded
Incl
uded
Incl
uded
Fiv
e-fir
m c
once
ntra
tion
ra
tio
0.00
501.
4113
0.01
062.
6792
Fiv
e-fir
m c
once
ntra
tion
ra
tio
afte
r be
ing
purg
ed
of th
e va
riat
ion
asso
ci-
ated
wit
h th
e fo
llow
ing
inde
pend
ent v
aria
bles
0.01
062.
6792
0.01
082.
8411
0.00
872.
3710
0.00
571.
3474
Tota
l num
ber
of
stra
tegi
c al
lianc
es
0.00
491.
4210
0.00
441.
3188
0.00
461.
3871
Tota
l num
ber
of m
erge
rs
and
acqu
isit
ions
0.00
020.
0760
0.00
100.
4133
0.00
050.
1727
Stra
tegi
c al
lianc
esD
omes
tic
0.00
651.
6049
0.00
120.
2677
Cro
ss b
orde
r0.
0018
0.38
230.
0132
2.30
59M
erge
rs a
nd a
cqui
siti
ons
Dom
esti
c0.
0039
1.20
51–0
.000
8–0
.242
4C
ross
bor
der
–0.0
077
–2.0
304
–0.0
056
–1.7
620
Tota
l num
ber
of b
anks
–0.0
115
–1.1
340
–0.0
125
–1.2
596
–0.0
159
–1.8
156
Con
trol
s fo
r re
gula
tory
N
otN
otN
otN
otN
otN
otch
ange
sin
clud
edin
clud
edin
clud
edin
clud
edin
clud
edin
clud
edIn
clud
ed
Wit
hin
R2
0.19
430.
1903
0.23
610.
2361
0.29
730.
4403
0.47
96N
o. o
f obs
erva
tion
s65
6565
6565
6565
Not
e: B
oldf
ace
indi
cate
s a
para
met
er e
stim
ate
that
is s
tati
stic
ally
diff
eren
t fro
m z
ero
on a
one
-tai
l tes
t.
Tab
le 1
1.10
Est
imat
ing
the
Det
erm
inan
ts o
f Ban
k S
prea
ds in
5 N
on-E
U N
atio
ns fr
om 1
990
to 1
999
Spec
ifica
tion
s
(2)
(3)
(4)
(5)
(6)
(7)
Par
amet
erP
aram
eter
Par
amet
erP
aram
eter
Par
amet
erP
aram
eter
Inde
pend
ent V
aria
ble
(1)
Est
imat
et-
rati
oE
stim
ate
t-ra
tio
Est
imat
et-
rati
oE
stim
ate
t-ra
tio
Est
imat
et-
rati
oE
stim
ate
t-ra
tio
Mac
roec
onom
ic c
ontr
ols
Incl
uded
Incl
uded
Incl
uded
Incl
uded
Incl
uded
Incl
uded
Incl
uded
Fiv
e-fir
m c
once
ntra
tion
ra
tio
0.00
020.
0313
0.00
360.
4322
Fiv
e-fir
m c
once
ntra
tion
ra
tio
afte
r be
ing
purg
ed
of th
e va
riat
ion
asso
ci-
ated
wit
h th
e fo
llow
ing
inde
pend
ent v
aria
bles
0.00
360.
4322
0.00
400.
4394
0.00
420.
4248
0.00
660.
9658
Tota
l num
ber
of s
trat
egic
al
lianc
es–0
.002
4–1
.053
4–0
.002
3–1
.040
8–0
.002
5–1
.060
2To
tal n
umbe
r of
mer
gers
an
d ac
quis
itio
ns–0
.000
3–0
.179
3–0
.090
3–0
.163
2–0
.000
4–0
.201
4St
rate
gic
allia
nces
Dom
esti
c0.
0005
0.11
410.
0018
0.42
05C
ross
bor
der
–0.0
069
–1.2
936
–0.0
092
–2.0
054
Mer
gers
and
acq
uisi
tion
sD
omes
tic
0.00
100.
1666
0.00
270.
4390
Cro
ss b
orde
r–0
.000
4–0
.162
8–0
.001
1–0
.442
9To
tal n
umbe
r of
ban
ks0.
0006
0.04
640.
0085
0.54
370.
0082
0.54
88C
ontr
ols
for
regu
lato
ry
Not
Not
Not
Not
Not
Not
chan
ges
incl
uded
incl
uded
incl
uded
incl
uded
incl
uded
incl
uded
Incl
uded
Wit
hin
R2
0.16
330.
1611
0.28
960.
2896
0.33
570.
3214
0.53
22N
umbe
r of
obs
erva
tion
s45
4545
4545
4545
Not
e: B
oldf
ace
indi
cate
s a
para
met
er e
stim
ate
that
is s
tati
stic
ally
diff
eren
t fro
m z
ero
on a
one
-tai
l tes
t.
outside the EU, cross-border strategic alliances were found to depress in-terest-rate spreads, suggesting that such corporate agreements generate effi-ciencies.
The parameter estimates from specification (7) in both tables 11.9 and11.10 can be used to quantify the total effect of the observed domestic andcross-border consolidation in the banking sectors that occurred in the1990s, as well as the total effect of the formation of strategic alliances. Table11.11 reports country-by-country the point estimates of the total effect oninterest-rate spreads of the domestic and cross-border banking changesobserved throughout the 1990s. In every non-EU country considered here,the combined effect of the domestic banking changes was to raise spreads,but this was offset by the beneficial effects created by cross-border strate-gic alliances and M&A. In each EU economy, the net effect of domesticbanking changes on spreads is almost zero and is dominated by the spread-increasing effects of cross-border strategic alliances. Indeed, had thosecross-border strategic alliances not occurred in the 1990s, bank spreads (asmeasured by the dependent variable) in each EU country considered herewould have been at least two whole percentage points lower in 1999. Incontrast, in the five non-EU economies, cross-border strategic alliancesand mergers have helped reduce spreads by between 1.3 and 3.0 percent-age points.
These findings suggest that interbank agreements and consolidation inthe 1990s had important effects on interest rates and, therefore, on the wel-fare of lenders or borrowers. What is doubtful, however, is that sweepingstatements about the effects of cross-border interbank agreements can bemade with any confidence. Indeed, the emphasis in much commentary onglobalization regarding the role of cross-border M&A is somewhat mis-placed at least in banking, since it appears that the consequences of cross-border strategic alliances are a more important part of the story.
11.4 Concluding Remarks
The cross-border mergers and acquisitions wave of the 1990s was on adifferent scale than its predecessor in the late 1990s: It included more firmsfrom more countries; saw a greater number of transactions, many of whichwere megadeals; and was dominated by service-sector transactions. Infact, three sectors (namely, transportation and communication, finance,and business services) accounted for just under half of the value of allM&A from 1997 to 2000. An evaluation of this recent cross-border merg-ers and acquisitions wave is, thus, in large part an evaluation of its effectson these three sectors. What is more, in each case there are good reasonsfor suspecting that cross-border M&A was not the only major change intheir market structures in the 1990s. The telecommunications sector sawmuch deregulation and technological advances, as did business services. In
The Cross-Border Mergers and Acquisitions Wave of the Late 1990s 443
Tab
le 1
1.11
Con
trib
utio
n of
Wit
hin
Bor
der
and
Cro
ss-B
orde
r T
rans
acti
ons
to C
hang
ing
Spr
eads
thro
ugho
ut th
e 19
90s
Wit
hin-
Bor
der
Tra
nsac
tion
s 19
90–1
999
Cro
ss-B
orde
r T
rans
acti
ons
1990
–199
9
Poin
t Est
imat
e of
Eff
ect o
nIn
tere
st-R
ate
Spre
ads
(%)
Poin
t Est
imat
e of
Eff
ect o
nIn
tere
st-R
ate
Spre
ads
(%)
Num
ber
Num
ber
Com
bine
d E
ffec
t of
Wit
hin-
and
Cro
ss-B
orde
rSt
rate
gic
Stra
tegi
cC
ombi
ned
Stra
tegi
cSt
rate
gic
Com
bine
dT
rans
acti
ons
on
Eco
nom
yA
llian
ces
M&
AA
llian
ces
M&
AE
ffec
tA
llian
ces
M&
AA
llian
ces
M&
AE
ffec
tIn
tere
st-R
ate
Spre
ads
(%)
Mem
bers
of t
he E
urop
ean
Uni
onB
elgi
um5
210.
215
–0.2
47–0
.032
1521
3.72
8–1
.716
1.94
81.
915
Swed
en3
470.
166
–0.3
09–0
.143
137
3.54
5–1
.158
2.34
62.
200
The
Net
herl
ands
1532
0.33
3–0
.279
0.05
326
124.
447
–1.4
262.
957
3.01
2Sp
ain
968
0.27
7–0
.338
–0.0
6240
215.
024
–1.7
163.
222
3.15
7F
ranc
e27
150
0.40
1–0
.401
–0.0
0263
505.
643
–2.1
783.
343
3.34
1G
erm
any
4018
60.
447
–0.4
180.
027
5632
5.48
2–1
.939
3.43
73.
465
Ital
y27
212
0.40
1–0
.428
–0.0
2952
165.
381
–1.5
743.
722
3.69
2T
he U
nite
d K
ingd
om19
320
00.
634
–0.4
230.
208
208
447.
306
–2.1
095.
043
5.26
2
Eco
nom
ies
Tha
t Are
Not
Mem
bers
of t
he E
urop
ean
Uni
onJa
pan
9610
20.
827
1.25
92.
096
183
6–4
.684
–0.2
14–4
.888
–2.8
94A
ustr
alia
145
750.
901
1.17
62.
088
118
22–4
.302
–0.3
44–4
.631
–2.6
40T
he U
nite
d St
ates
1,13
62,
836
1.27
52.
170
3.47
233
975
–5.2
21–0
.475
–5.6
72–2
.397
Can
ada
8498
0.80
31.
248
2.06
181
4–3
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–0.1
77–4
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–2.1
67Sw
itze
rlan
d15
790.
500
1.19
01.
696
1428
–2.4
61–0
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–2.8
21–1
.173
Com
bine
d E
ffec
t of
Wit
hin-
and
Cro
ss-B
orde
rT
rans
acti
ons
onIn
tere
st-R
ate
Spre
ads
(%)
banking, whose consolidation was studied in more detail in this chapter,strategic alliances and domestic M&As were consummated in large num-bers in the 1990s. Correcting for these other developments was found to beimportant when accurately gauging the effect of cross-border mergers andacquisitions in the banking sector.
My empirical analysis of thirteen OECD economies’ banking sectorspoints to a discernable impact of openness to foreign banking activitieson bank spreads. In eight EU economies, the beneficial consequences ofcross-border M&As was more than offset by the deleterious impact ofcross-border strategic alliances. In contrast, the net effect of openness toforeign banking activities has been to benefit customers in non-Europeanindustrialized economies.
This chapter speaks to a number of themes discussed throughout thisbook. First, by documenting the factual record on cross-border mergersand acquisitions, a better sense of the scale of this phenomenon emerged.Facts replace assertions. For sure, cross-border mergers and acquisitions inthe late 1990s were greater than in the late 1980s. However, the former stillonly represent a small fraction of the stock-market capitalizations of allbut the smallest industrialized economies. Indeed, in almost every indus-trial country, foreigners are hardly snapping up domestic assets at a ratethat some might find alarming.
The second important finding of this chapter relates to the concern thatchanges in the global economy in recent years have sought to reinforce themarket power of corporations. The sectoral study of banking presentedhere points to the importance of correctly identifying all of the changes ina given sector’s structure and its regulations before drawing any inferencesabout the effects of consolidation on customers. In the EU banking sector,the evidence suggests that cross-border M&As have actually benefitedbank customers rather than harming them. In contrast, cross-border stra-tegic alliances have probably hurt customers in the EU, suggesting thatnot all cross-border corporate acts have the same effects. More nuance isclearly needed in policy debates so that cross-border interfirm measuresare not automatically branded as bad or anticonsumer.
The Cross-Border Mergers and Acquisitions Wave of the Late 1990s 445
App
endi
x
Tab
le 1
1A.1
Meg
amer
gers
and
Acq
uisi
tion
s in
200
0
Acq
uiri
ng C
ompa
nyA
cqui
red
Com
pany
Hea
dqua
rter
s L
ocat
ion
Val
ue o
fC
ross
-Bor
der
Tra
nsac
tion
Ran
k($
bill
ions
)N
ame
Indu
stry
Nam
eIn
dust
ryA
cqui
ring
Fir
mA
cqui
red
Fir
m
120
2.8
Vod
afon
e R
adio
tele
phon
e M
anne
sman
n A
GR
adio
tele
phon
e T
he U
nite
d G
erm
any
Air
Touc
h P
LC
com
mun
icat
ions
com
mun
icat
ions
Kin
gdom
246
.0F
ranc
e T
elec
om S
AT
elep
hone
com
mu-
Ora
nge
PL
C
Tel
epho
ne c
omm
u-F
ranc
eT
he U
nite
d ni
cati
ons,
exc
ept
(Man
nesm
ann
AG
)ni
cati
ons,
exc
ept
Kin
gdom
radi
otel
epho
nera
diot
elep
hone
340
.4V
iven
di S
AW
ater
sup
ply
Seag
ram
Cc
Ltd
.M
otio
n pi
ctur
e F
ranc
eC
anad
aan
d vi
deot
ape
prod
ucti
on
427
.2B
P A
moc
o P
LC
Pet
role
um r
efini
ngA
RC
OP
etro
leum
refi
ning
The
Uni
ted
The
Uni
ted
Stat
esK
ingd
om
525
.1U
nile
ver
PL
CC
ream
ery
butt
erB
estf
oods
Dri
ed fr
uits
, T
he U
nite
d T
he U
nite
d St
ates
vege
tabl
es, a
nd
Kin
gdom
soup
mix
es
619
.4Z
uric
h A
llied
AG
Lif
e in
sura
nce
Alli
ed Z
uric
h P
LC
Lif
e in
sura
nce
Swit
zerl
and
The
Uni
ted
Kin
gdom
716
.5U
BS
AG
Ban
ks, n
on-U
.S.
Pai
neW
ebbe
r Se
curi
ty b
roke
rs,
Swit
zerl
and
The
Uni
ted
Stat
esch
arte
red
Gro
up I
nc.
deal
ers
and
flota
-ti
on c
ompa
nies
814
.4V
odaf
one
Rad
iote
leph
one
Air
tel S
AR
adio
tele
phon
e T
he U
nite
d Sp
ain
Air
Touc
h P
LC
com
mun
icat
ions
com
mun
icat
ions
Kin
gdom
913
.5C
redi
t Sui
sse
Fir
st
Secu
rity
bro
kers
, D
onal
dson
Luf
kin
Com
mod
ity
con-
The
Uni
ted
Stat
esT
he U
nite
d St
ates
Bos
ton
deal
ers
and
flota
-&
Jen
rett
etr
acts
, bro
kers
, and
ti
on c
ompa
nies
deal
ers
1011
.8C
ap G
emin
i SA
Bus
ines
s co
nsul
ting
E
rnst
& Y
oung
B
usin
ess
cons
ulti
ng
Fra
nce
The
Uni
ted
Stat
esse
rvic
es, n
ecC
onsu
ltin
g B
us.
serv
ices
, nec
1111
.1H
SBC
Hol
ding
s B
anks
, non
-U.S
. C
redi
t Com
mer
cial
B
anks
, non
-U.S
. T
he U
nite
d F
ranc
eP
LC
char
tere
dde
Fra
nce
char
tere
dK
ingd
om
1211
.0N
TL
Inc
.C
able
and
oth
er p
ay
CW
C C
onsu
mer
Co.
Tel
epho
ne c
omm
u-T
he U
nite
d St
ates
The
Uni
ted
tele
visi
on s
ervi
ces
nica
tion
s, e
xcep
t K
ingd
omra
diot
elep
hone
1310
.2T
elef
onic
a SA
Tel
epho
ne c
omm
u-T
elec
om m
unic
acoe
s T
elep
hone
com
mu-
Spai
nB
razi
lni
cati
ons,
exc
ept
de S
ao P
aulo
nica
tion
s, e
xcep
t ra
diot
elep
hone
radi
otel
epho
ne
149.
4B
ellS
outh
Gm
bH
Tel
epho
ne c
omm
u-E
-Plu
s M
obilf
unk
Rad
iote
leph
one
The
Net
herl
ands
Ger
man
y(K
PN
, Bel
lSou
th)
nica
tion
s, e
xcep
t G
mbH
(Ote
lo)
com
mun
icat
ions
radi
otel
epho
ne
158.
3A
mer
ica
Onl
ine
Inc.
Pre
pack
aged
A
OL
Eur
ope,
AO
L
Info
rmat
ion
The
Uni
ted
Stat
esG
erm
any
soft
war
eA
ustr
alia
retr
ieva
l ser
vice
s
167.
7C
hase
Man
hatt
an
Nat
iona
l com
mer
-R
ober
t Fle
min
g Se
curi
ty b
roke
rs,
The
Uni
ted
Stat
esT
he U
nite
d C
orp.
, N.Y
.ci
al b
anks
Hol
ding
s L
td.
deal
ers,
and
flot
a-K
ingd
omti
on c
ompa
nies
177.
6IN
G G
roep
NV
Lif
e in
sura
nce
Aet
na F
inan
cial
Se
curi
ty a
nd c
om-
The
Net
herl
ands
The
Uni
ted
Stat
esSe
rvic
es &
Int
erna
-m
odit
y se
rvic
es, n
ecti
onal
Bus
.(c
onti
nued
)
Tab
le 1
1A.1
(con
tinu
ed)
Acq
uiri
ng C
ompa
nyA
cqui
red
Com
pany
Hea
dqua
rter
s L
ocat
ion
Val
ue o
fC
ross
-Bor
der
Tra
nsac
tion
Ran
k($
bill
ions
)N
ame
Indu
stry
Nam
eIn
dust
ryA
cqui
ring
Fir
mA
cqui
red
Fir
m
187.
1B
riti
sh A
mer
ican
C
igar
ette
sIm
asco
Ltd
.E
atin
g pl
aces
The
Uni
ted
Can
ada
Toba
cco
PL
CK
ingd
om
197.
1A
lcat
el S
AT
elep
hone
and
tele
-N
ewbr
idge
T
elep
hone
and
F
ranc
eC
anad
agr
aph
appa
ratu
sN
etw
orks
Cor
p.te
legr
aph
appa
ratu
s
207.
1N
orte
l Net
wor
ks
Tel
epho
ne a
nd te
le-
Afe
on W
ebsy
stem
s E
lect
roni
c co
mpo
-C
anad
aT
he U
nite
d St
ates
Cor
p.gr
aph
appa
ratu
sIn
c.ne
nts,
nec
216.
7D
aim
lerC
hrys
ler
Air
craf
t par
ts a
nd
Aer
ospa
tial
e M
atra
Air
craf
tG
erm
any
Fra
nce
Aer
ospa
ce A
Geq
uipm
ent
226.
3R
WE
AG
Ele
ctri
c an
d ot
her
Tha
mes
Wat
er P
LC
Wat
er s
uppl
yG
erm
any
The
Uni
ted
serv
ices
com
bine
dK
ingd
om
236.
2T
erra
Net
wor
ks
Info
rmat
ion-
Lyc
os I
nc.
Info
rmat
ion-
Spai
nT
he U
nite
d St
ates
(Tel
efon
ica
SA)
retr
ieva
l ser
vice
sre
trie
val s
ervi
ces
246.
0IN
G G
roep
NV
Lif
e in
sura
nce
Rel
iaSt
ar F
inan
cial
L
ife
insu
ranc
eT
he N
ethe
rlan
dsT
he U
nite
d St
ates
Cor
p.
255.
7N
TT
T
elep
hone
com
mu-
Ver
io I
nc.
Dat
a-pr
oces
sing
Ja
pan
The
Uni
ted
Stat
esC
omm
unic
atio
ns
nica
tion
s, e
xcep
t se
rvic
esC
orp.
radi
otel
epho
ne
265.
4Po
wer
Gen
PL
CE
lect
ric
serv
ices
LG
&E
Ene
rgy
Ele
ctri
c se
rvic
esT
he U
nite
d T
he U
nite
d St
ates
Cor
p.K
ingd
om
275.
3C
LT-U
FA (C
ie
Rad
io b
road
cast
ing
Pea
rson
Tel
evis
ion
Tel
evis
ion
broa
d-L
uxem
bour
gT
he U
nite
d L
uxem
bour
geoi
se)
stat
ions
(Pea
rson
)ca
stin
g st
atio
nsK
ingd
om
285.
2L
econ
port
Est
ates
Inve
stor
s, n
ecM
EP
C P
LC
Lan
d su
bdiv
ider
s M
ulti
nati
onal
The
Uni
ted
and
deve
lope
rs,
Kin
gdom
exce
pt c
emet
erie
s
295.
0B
riti
sh
Tel
epho
ne c
omm
u-A
T&
T W
orld
wid
e T
elep
hone
com
mu-
The
Uni
ted
The
Uni
ted
Stat
esT
elec
omm
unic
atio
nsni
cati
ons,
exc
ept
Ass
ets,
Ops
nica
tion
s, e
xcep
t K
ingd
omra
diot
elep
hone
radi
otel
epho
ne
305.
0W
PP
Gro
up P
LC
Adv
erti
sing
age
ncie
sY
oung
& R
ubic
am
Adv
erti
sing
age
ncie
sT
he U
nite
d T
he U
nite
d St
ates
Inc.
Kin
gdom
314.
9St
ora
Ens
o O
yjP
aper
mill
sC
onso
lidat
ed
Pap
erbo
ard
mill
sF
inla
ndT
he U
nite
d St
ates
Pap
ers
Inc.
324.
9T
isca
li Sp
AT
elep
hone
com
mu-
Wor
ld O
nlin
e In
form
atio
n-It
aly
The
Net
herl
ands
nica
tion
s, e
xcep
t In
tern
atio
nal N
Vre
trie
val s
ervi
ces
radi
otel
epho
ne
334.
8N
ordb
anke
n O
ffice
s of
hol
ding
M
edia
Oy
Ban
ks, n
on-U
.S.
Swed
enF
inla
ndH
oldi
ng A
Bco
mpa
nies
, nec
char
tere
d
344.
8A
lcan
Alu
min
um
Alu
min
um fo
undr
ies
Alu
suis
se L
onza
P
acka
ging
pap
er &
C
anad
aSw
itze
rlan
dL
td.
Gro
up L
td.
plas
tics
film
, coa
ted
& la
min
ated
354.
6T
elef
onic
a SA
Tel
epho
ne c
omm
u-E
ndem
ol
Mot
ion-
pict
ure
Spai
nT
he N
ethe
rlan
dsni
cati
ons,
exc
ept
Ent
erta
inm
ent N
Van
d vi
deot
ape
radi
otel
epho
nepr
oduc
tion
364.
4M
erit
aNor
dban
ken
Ban
ks, n
on-U
.S.
Uni
danm
ark
A/S
Ban
ks, n
on-U
.S.
Fin
land
Den
mar
kch
arte
red
char
tere
d(c
onti
nued
)
Tab
le 1
1A.1
(con
tinu
ed)
Acq
uiri
ng C
ompa
nyA
cqui
red
Com
pany
Hea
dqua
rter
s L
ocat
ion
Val
ue o
fC
ross
-Bor
der
Tra
nsac
tion
Ran
k($
bill
ions
)N
ame
Indu
stry
Nam
eIn
dust
ryA
cqui
ring
Fir
mA
cqui
red
Fir
m
374.
4Ty
co I
nter
nati
onal
G
ener
al in
dust
rial
M
allin
ckro
dt I
nc.
In-v
itro
and
in-v
ivo
Ber
mud
aT
he U
nite
d St
ates
Ltd
.m
achi
nery
and
di
agno
stic
sub
stan
ces
equi
pmen
t
384.
3F
ranc
e T
elec
om S
AT
elep
hone
com
mu-
Glo
bal O
ne C
cT
elep
hone
com
mu-
Fra
nce
The
Uni
ted
Stat
esni
cati
ons,
exc
ept
nica
tion
s, e
xcep
t ra
diot
elep
hone
radi
otel
epho
ne
394.
3Sa
me
Gro
up P
LC
Com
pute
r re
late
d L
HS
Gro
up I
nc.
Com
pute
r-pr
ogra
mT
he U
nite
d T
he U
nite
d St
ates
serv
ices
, nec
min
g se
rvic
esK
ingd
om
404.
3In
vest
or G
roup
Inve
stor
s, n
ecT
PSA
Rad
iote
leph
one
Fra
nce
Pola
ndco
mm
unic
atio
ns
414.
2N
atio
nal G
rid
Ele
ctri
c se
rvic
esN
ew E
ngla
nd
Ele
ctri
c se
rvic
esT
he U
nite
d T
he U
nite
d St
ates
Gro
up P
LC
Ele
ctri
c Sy
stem
Kin
gdom
424.
0A
llian
ce C
apit
al
Inve
stm
ent a
dvic
eSa
nfor
d C
. In
vest
men
t adv
ice
The
Uni
ted
Stat
esT
he U
nite
d St
ates
Man
agem
ent
Bor
nste
in &
Co.
Inc
.
433.
9B
ASF
AG
Indu
stri
al o
rgan
ic
Am
eric
an C
yana
-P
esti
cide
s &
agr
icul
-G
erm
any
The
Uni
ted
Stat
esch
emic
als,
nec
mid
Agr
icul
tura
l tu
ral c
hem
ical
s, n
ecP
rodu
ct
443.
7N
TL
Inc
.C
able
and
oth
er p
ay
Cab
leco
m H
oldi
ng
Cab
le a
nd o
ther
pay
T
he U
nite
d St
ates
Swit
zerl
and
tele
visi
on s
ervi
ces
AG
tele
visi
on s
ervi
ces
453.
6F
ranc
e T
elec
om S
AT
elep
hone
com
mu-
Mob
ilCom
AG
Tel
epho
ne c
omm
u-F
ranc
eG
erm
any
nica
tion
s, e
xcep
t ni
cati
ons,
exc
ept
radi
otel
epho
nera
diot
elep
hone
463.
6K
onin
kfjk
e A
hold
G
roce
ry s
tore
sU
.S. F
oods
ervi
ce
Gro
ceri
es, g
ener
al
The
Net
herl
ands
The
Uni
ted
Stat
esN
VIn
c.lin
e
473.
6N
TT
Mob
ile
Tel
epho
ne c
omm
u-K
PN
Mob
ile
Tel
epho
ne c
omm
u-Ja
pan
The
Net
herl
ands
Com
mun
icat
ions
ni
cati
ons,
exc
ept
(KP
N T
elec
om N
V)
nica
tion
s, e
xcep
t N
etw
ork
Inc.
radi
otel
epho
nera
diot
elep
hone
483.
6C
orni
ng I
nc.
Tel
epho
ne a
nd
Pir
elli
SpA
-Opt
ical
D
raw
ing
& in
su-
The
Uni
ted
Stat
esIt
aly
tele
grap
h ap
para
tus
Com
pone
nts
lati
ng o
f non
ferr
ous
wir
e
493.
5A
XA
Lif
e in
sura
nce
Sun
Lif
e an
d L
ife
insu
ranc
eF
ranc
eT
he U
nite
d P
rovi
ncia
lK
ingd
om
503.
5In
terb
rew
SA
Mal
t bev
erag
esB
ass
PL
C-B
rew
ing
Mal
t bev
erag
esB
elgi
umT
he U
nite
d O
pera
tion
sK
ingd
om
513.
4W
PD
Hol
ding
s E
lect
ric
serv
ices
Hyd
er P
LC
Eng
inee
ring
ser
vice
sT
he U
nite
d T
he U
nite
d U
.K.
Kin
gdom
Kin
gdom
523.
4R
odam
co N
orth
R
eal-
esta
teU
rban
Sho
ppin
g R
eal-
esta
te-
The
Net
herl
ands
The
Uni
ted
Stat
esA
mer
ica
NV
inve
stm
ent t
rust
sC
ente
rs I
nc.
inve
stm
ent t
rust
s
533.
3N
orte
l Net
wor
ks
Tel
epho
ne a
nd te
le-
Xro
s In
c.T
elep
hone
and
tele
-C
anad
aT
he U
nite
d St
ates
Cor
p.gr
aph
appa
ratu
sgr
aph
appa
ratu
s
543.
3N
orte
l Net
wor
ks
Tel
epho
ne a
nd te
le-
Qte
ra C
orp.
Tel
epho
ne a
nd te
le-
Can
ada
The
Uni
ted
Stat
esC
orp.
grap
h ap
para
tus
grap
h ap
para
tus
552.
9H
elle
nic
Bot
tlin
g B
ottl
ed &
can
ned
Coc
a-C
ola
Bot
tled
& c
anne
d G
reec
eT
he U
nite
d C
c SA
soft
dri
nks
and
car-
Bev
erag
es P
LC
soft
dri
nks
and
car-
Kin
gdom
bona
ted
wat
ers
bona
ted
wat
ers
(con
tinu
ed)
Tab
le 1
1A.1
(con
tinu
ed)
Acq
uiri
ng C
ompa
nyA
cqui
red
Com
pany
Hea
dqua
rter
s L
ocat
ion
Val
ue o
fC
ross
-Bor
der
Tra
nsac
tion
Ran
k($
bill
ions
)N
ame
Indu
stry
Nam
eIn
dust
ryA
cqui
ring
Fir
mA
cqui
red
Fir
m
562.
8C
emex
Cem
ent,
hyd
raul
icSo
uthd
own
Inc.
Cem
ent,
hyd
raul
icM
exic
oT
he U
nite
d St
ates
572.
8G
loba
l Cro
ssin
g T
elep
hone
com
mu-
IPC
Com
mun
ica-
Info
rmat
ion
Ltd
.ni
cati
ons,
exc
ept
tion
s (C
itic
orp)
retr
ieva
l ser
vice
sB
erm
uda
The
Uni
ted
Stat
esra
diot
elep
hone
582.
8In
vest
or G
roup
Inve
stor
s, n
ecD
euts
che
Tel
ekom
T
elep
hone
com
mu-
The
Uni
ted
Stat
esG
erm
any
AG
-Nor
thni
cati
ons,
exc
ept
radi
otel
epho
ne
592.
8M
erit
aNor
dban
ken
Ban
ks, n
on-U
.S.
Chr
isti
ania
Ban
kB
anks
, non
-U.S
. F
inla
ndN
orw
aych
arte
red
char
tere
d
602.
8H
avas
Adv
erti
sing
A
dver
tisi
ng a
genc
ies
Snyd
er C
omm
unic
a-B
usin
ess
serv
ices
, F
ranc
eT
he U
nite
d St
ates
SAti
ons
Inc.
nec
612.
7P
reus
sag
AG
Tra
vel a
genc
ies
Tho
mso
n T
rave
l To
ur o
pera
tors
Ger
man
yT
he U
nite
d G
roup
PL
CK
ingd
om
622.
7N
orsk
e P
ulp
mill
sF
letc
her
Cha
lleng
e P
ulp
mill
sN
orw
ayN
ew Z
eala
ndSk
ogin
dust
rier
AS
Pap
er
632.
7F
ord
Mot
or C
o.M
otor
veh
icle
s an
d L
and
Rov
er (B
MW
)M
otor
veh
icle
s &
T
he U
nite
d St
ates
The
Uni
ted
pass
enge
r-ca
r bo
dies
pass
enge
r-ca
r bo
dies
Kin
gdom
642.
6F
lext
roni
cs
Pri
nted
cir
cuit
D
II G
roup
Ele
ctro
nic
com
po-
Sing
apor
eT
he U
nite
d St
ates
Inte
rnat
iona
l Ltd
.bo
ards
nent
s, n
ec
652.
6G
ener
al S
ekiy
u P
etro
leum
refi
ning
Tone
n C
orp.
P
etro
leum
refi
ning
Japa
nT
he U
nite
d St
ates
(Ess
o E
aste
rn)
(Exx
on M
obil)
662.
5H
anso
n P
LC
Men
’s fo
otw
ear,
Pio
neer
Int
erna
-R
eady
-mix
ed
The
Uni
ted
Aus
tral
iaex
cept
ath
leti
cti
onal
Ltd
.co
ncre
teK
ingd
om
672.
5D
exia
Bel
gium
Secu
rity
bro
kers
, F
inla
nd S
ecur
ity
Sure
ty in
sura
nce
Bel
gium
The
Uni
ted
Stat
esde
aler
s an
d flo
tati
on
Ass
uran
ce H
oldi
ngs
com
pani
es
682.
5P
ears
on P
LC
Boo
ks: p
ublis
hing
, N
atio
nal C
ompu
ter
Com
pute
r-T
he U
nite
d T
he U
nite
d St
ates
or p
ublis
hing
&
Syst
ems
Inc.
peri
pher
al e
quip
-K
ingd
ompr
inti
ngm
ent,
nec
692.
5Ty
co I
nter
nati
onal
G
ener
al in
dust
rial
L
ucen
t Tec
h In
c.-
Ele
ctro
nic
com
po-
Ber
mud
aT
he U
nite
d St
ates
Ltd
.m
achi
nery
and
Po
wer
Sys
tem
Uni
tne
nts,
nec
equi
pmen
t
702.
5C
arre
four
SA
Gro
cery
sto
res
Gru
ppo
GS
SpA
V
arie
ty s
tore
sF
ranc
eIt
aly
(Sch
emav
entu
no)
712.
5B
ayer
AG
Med
icin
al-c
hem
ical
s L
yond
ell C
hem
ical
-P
etro
leum
-refi
ning
G
erm
any
The
Uni
ted
Stat
esan
d bo
tani
cal p
rod-
Poly
fs B
us.
prod
ucti
onuc
ts, r
adio
tele
phon
e
722.
4T
elef
onic
a SA
Tel
epho
ne c
omm
u-T
eles
udes
te C
elul
arT
elep
hone
com
mu-
Spai
nB
razi
lni
cati
ons,
exc
ept
nica
tion
s, e
xcep
t ra
diot
elep
hone
radi
otel
epho
ne
732.
4G
ener
al M
otor
s C
orp.
Mot
or v
ehic
les
and
Fia
t Aut
o Sp
A
Mot
or v
ehic
les
&
The
Uni
ted
Stat
esIt
aly
pass
enge
r-ca
r bo
dies
(Fia
t SpA
)pa
ssen
ger-
car
bodi
es(c
onti
nued
)
Tab
le 1
1A.1
(con
tinu
ed)
Acq
uiri
ng C
ompa
nyA
cqui
red
Com
pany
Hea
dqua
rter
s L
ocat
ion
Val
ue o
fC
ross
-Bor
der
Tra
nsac
tion
Ran
k($
bill
ions
)N
ame
Indu
stry
Nam
eIn
dust
ryA
cqui
ring
Fir
mA
cqui
red
Fir
m
742.
3A
tos
SAC
ompu
ter-
Ori
gin
(Phi
lips
Ele
c-P
repa
ckag
ed
Fra
nce
The
Net
herl
ands
prog
ram
min
g se
r-tr
onic
s N
V)
Soft
war
evi
ces
752.
3T
-Onl
ine
Info
rmat
ion-
Clu
b In
tern
et
Info
rmat
ion-
Ger
man
yF
ranc
eIn
tern
atio
nal A
Gre
trie
val s
ervi
ces
(Lag
arde
re G
roup
)re
trie
val s
ervi
ces
762.
3G
ener
al E
lect
ric
Per
sona
l-cr
edit
To
ho M
utua
l Lif
eL
ife
insu
ranc
eT
he U
nite
d St
ates
Japa
nC
apit
al C
orp.
inst
itut
ions
772.
3U
nile
ver
NV
Cre
amer
y bu
tter
Slim
Fas
t Foo
ds C
cF
ood
prep
arat
ions
, T
he N
ethe
rlan
dsT
he U
nite
d St
ates
nec
782.
2In
vest
or G
roup
Inve
stor
s, n
ecE
PO
N N
V (E
DO
N,
Ele
ctri
c se
rvic
esB
elgi
umT
he N
ethe
rlan
dsN
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N)
792.
2In
vest
or G
roup
Inve
stor
s, n
ecE
TSA
Uti
litie
s,
Ele
ctri
c se
rvic
esH
ong
Kon
g, C
hina
Aus
tral
iaE
TSA
Pow
er
802.
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elef
onic
a T
elep
hone
com
mu-
CE
I C
itic
orp
Offi
ces
of h
oldi
ng
Spai
nA
rgen
tina
Inte
rnac
iona
l SA
nica
tion
s, e
xcep
t E
quit
y H
oldi
ngs
com
pani
es, n
ecra
diot
elep
hone
812.
2Sa
lom
on S
mit
h Se
curi
ty b
roke
rs,
Schr
oder
s-Se
curi
ty b
roke
rs,
The
Uni
ted
Stat
esT
he U
nite
d B
arne
y H
oldi
ngs
deal
ers
and
flota
tion
W
orld
wid
e de
aler
s an
d flo
ta-
Kin
gdom
com
pani
esIn
vest
men
tti
on c
ompa
nies
822.
2C
DC
Ass
et
Man
agem
ent-
NV
EST
LP
Inve
stm
ent o
ffice
s,
Fra
nce
The
Uni
ted
Stat
esM
anag
emen
t in
vest
men
t offi
ces,
ne
cE
urop
eop
en e
nd
832.
2In
vest
or G
roup
Inve
stor
s, n
ecM
ark
IV I
ndus
trie
s R
ubbe
r an
d pl
asti
cs
The
Uni
ted
The
Uni
ted
Stat
esIn
c.ho
se a
nd b
elti
ngK
ingd
om
842.
2T
hom
son-
CSF
Gui
ded-
mis
sile
and
R
acal
Ele
ctro
nics
E
lect
roni
c F
ranc
eT
he U
nite
d sp
ace-
vehi
cle
part
s,
PL
Cco
mpu
ters
Kin
gdom
nec
852.
2B
T H
awth
orn
Ltd
.T
elep
hone
com
mu-
Esa
t Tel
ecom
C
omm
unic
atio
ns
The
Uni
ted
Irel
and
nica
tion
s, e
xcep
t G
roup
PL
Cse
rvic
es, n
ecK
ingd
omra
diot
elep
hone
862.
1C
isco
Sys
tem
s In
c.C
ompu
ter-
Pir
elli-
Fib
re O
ptic
O
ptic
al in
stru
men
ts
The
Uni
ted
Stat
esIt
aly
peri
pher
al e
quip
-O
pera
tion
san
d le
nses
men
t, n
ec
872.
1M
etsa
-Ser
ia O
yP
aper
mill
sM
oDo
Pap
er A
BP
aper
mill
sF
inla
ndSw
eden
882.
1R
io T
into
Ltd
.Ir
on o
res
Nor
th L
td.
Gol
d or
esT
he U
nite
d A
ustr
alia
Kin
gdom
892.
1Si
emen
s C
orp.
C
omm
unic
atio
ns
Shar
ed M
edic
al
Com
pute
r-fa
cilit
ies-
The
Uni
ted
Stat
esT
he U
nite
d St
ates
(Sie
men
s A
G)
equi
pmen
t, n
ecSy
stem
s C
orp.
man
agem
ent s
ervi
ces
902.
0C
ie d
e Sa
int-
Abr
asiv
e pr
oduc
tsM
eyer
Int
erna
tion
al
Lum
ber,
plyw
ood,
F
ranc
eT
he U
nite
d G
obai
n SA
PL
Cm
illw
ork
and
woo
d K
ingd
ompa
nels
912.
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inal
real
mF
ood
prep
arat
ions
, U
nite
d B
iscu
its
Fro
zen
spec
ialt
ies,
F
ranc
eT
he U
nite
d ne
c(H
oldi
ngs)
PL
Cne
cK
ingd
om
922.
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exam
PL
CSa
nita
ry-p
aper
A
mer
ican
Nat
iona
l M
etal
can
sT
he U
nite
d T
he U
nite
d St
ates
prod
ucts
Can
Gro
upK
ingd
om(c
onti
nued
)
Tab
le 1
1A.1
(con
tinu
ed)
Acq
uiri
ng C
ompa
nyA
cqui
red
Com
pany
Hea
dqua
rter
s L
ocat
ion
Val
ue o
fC
ross
-Bor
der
Tra
nsac
tion
Ran
k($
bill
ions
)N
ame
Indu
stry
Nam
eIn
dust
ryA
cqui
ring
Fir
mA
cqui
red
Fir
m
932.
0W
orm
s et
Cie
Lif
e in
sura
nce
Ado
Wig
gins
P
aper
mill
sF
ranc
eT
he U
nite
d A
pple
ton
PL
CK
ingd
om
942.
0A
XA
Lif
e in
sura
nce
Nip
pon
Dan
tai L
ife
Lif
e in
sura
nce
Fra
nce
Japa
nIn
sura
nce
951.
9A
llian
z A
GL
ife
insu
ranc
eP
IMC
O A
dvis
ors
Inve
stm
ent a
dvic
eG
erm
any
The
Uni
ted
Stat
esH
oldi
ngs
LP
961.
9D
aim
lerC
hrys
ler
Mot
or v
ehic
les
and
Mit
subi
shi M
otor
s M
otor
veh
icle
s &
G
erm
any
Japa
nA
Gpa
ssen
ger-
car
bodi
esC
orp.
pass
enge
r ca
r bo
dies
971.
9N
odal
Net
wor
ks
Tel
epho
ne a
nd te
le-
Cor
eTek
Inc
.T
elep
hone
and
tele
-C
anad
aT
he U
nite
d St
ates
Cor
p.gr
aph
appa
ratu
sgr
aph
appa
ratu
s
981.
9T
elen
or A
ST
elep
hone
com
mu-
Sono
fon
Tel
epho
ne c
omm
u-N
orw
ayD
enm
ark
nica
tion
s, e
xcep
t ni
cati
ons,
exc
ept
radi
otel
epho
nera
diot
elep
hone
991.
9N
orte
l Net
wor
ks
Tel
epho
ne a
nd te
le-
Cla
rify
Inc
.P
repa
ckag
ed
Can
ada
The
Uni
ted
Stat
esC
orp.
grap
h ap
para
tus
soft
war
e
100
1.8
Suez
Lyo
nnai
se d
es
Wat
er s
uppl
yU
nite
d W
ater
W
ater
sup
ply
Fra
nce
The
Uni
ted
Stat
esE
aux
SAR
esou
rces
Inc
.
101
1.8
Bri
tish
Tel
ecom
mu-
Com
mun
icat
ions
T
elfo
rtR
adio
tele
phon
e T
he U
nite
d T
he N
ethe
rlan
dsni
cati
ons
PL
Cse
rvic
es, n
ecco
mm
unic
atio
nsK
ingd
om
102
1.8
NT
T D
oCoM
o In
c.T
elep
hone
com
mu-
Hut
chis
on 3
G U
.K.
Tel
epho
ne c
omm
u-Ja
pan
The
Uni
ted
nica
tion
s, e
xcep
t H
oldi
ngs
Ltd
.ni
cati
ons,
exc
ept
Kin
gdom
radi
otel
epho
nera
diot
elep
hone
103
1.8
Net
com
AB
Com
mun
icat
ions
So
ciet
e E
urop
eenn
e T
elep
hone
com
mu-
Swed
enL
uxem
bour
gse
rvic
es, n
ecde
Com
mun
nica
tion
s, e
xcep
t ra
diot
elep
hone
104
1.8
Alc
atel
SA
Tel
epho
ne a
nd te
le-
Gen
esys
P
repa
ckag
ed
Fra
nce
The
Uni
ted
Stat
esgr
aph
appa
ratu
sT
elec
omm
un L
abs
Soft
war
e
105
1.8
Kon
inkl
ijke
Dry
, con
dens
ed &
Rex
all S
undo
wn
Inc.
Pha
rmac
euti
cal-
The
Net
herl
ands
The
Uni
ted
Stat
esN
umic
o N
Vev
apor
ated
dai
ry
prep
arat
ions
pro
-pr
oduc
ts r
adio
-du
ctio
nte
leph
one
106
1.8
Am
vesc
ap P
LC
Inve
stm
ent a
dvic
eT
rim
ark
Fin
anci
al
Secu
rity
bro
kers
, T
he U
nite
d C
anad
aC
orp.
deal
ers
and
flota
-K
ingd
omti
on c
ompa
nies
107
1.7
Cla
rian
t AG
Alk
alie
s an
d B
TP
PL
CIn
dust
rial
inor
gani
c Sw
itze
rlan
dT
he U
nite
d ch
lori
nech
emic
als,
nec
Kin
gdom
108
1.7
Inve
stor
Gro
upIn
vest
ors,
nec
Shop
pers
Dru
g D
rug
stor
es a
nd
The
Uni
ted
Stat
esC
anad
aM
art (
Imas
co L
td.)
prop
riet
ary
stor
es
109
1.7
Pub
licis
SA
Adv
erti
sing
age
ncie
sSa
atch
i & S
aatc
hi
Adv
erti
sing
age
ncie
sF
ranc
eT
he U
nite
d P
LC
Kin
gdom
110
1.7
Ela
n C
orp.
PL
CP
harm
aceu
tica
l D
ura
Pha
rmac
euti
-P
harm
aceu
tica
l Ir
elan
dT
he U
nite
d St
ates
prep
arat
ions
cals
Inc
.pr
epar
atio
ns
111
1.7
Skan
dina
visk
a B
anks
, non
-U.S
. B
ank
fur
Gem
ein-
Ban
ks, n
on-U
.S.
Swed
enG
erm
any
Ens
kild
a B
anke
nch
arte
red
wir
tsch
aft A
Gch
arte
red
(con
tinu
ed)
Tab
le 1
1A.1
(con
tinu
ed)
Acq
uiri
ng C
ompa
nyA
cqui
red
Com
pany
Hea
dqua
rter
s L
ocat
ion
Val
ue o
fC
ross
-Bor
der
Tra
nsac
tion
Ran
k($
bill
ions
)N
ame
Indu
stry
Nam
eIn
dust
ryA
cqui
ring
Fir
mA
cqui
red
Fir
m
112
1.7
BA
E S
YST
EM
SA
ircr
aft e
ngin
es a
nd
Loc
khee
d M
arti
n-Se
arch
, det
ecti
on,
The
Uni
ted
Stat
esT
he U
nite
d St
ates
Nor
th A
mer
ica
engi
ne p
arts
Aer
ospa
cean
d na
viga
tion
eq
uipm
ent
113
1.7
AE
S C
orp.
Ele
ctri
c se
rvic
esC
A L
a E
lect
rici
dad
Ele
ctri
c se
rvic
esT
he U
nite
d St
ates
Ven
ezue
lade
Car
acas
114
1.6
Nat
ionw
ide
Mut
ual
Fir
e, m
arin
e, a
nd
Gar
tmor
e In
vest
-In
vest
men
t offi
ces,
T
he U
nite
d St
ates
The
Uni
ted
Insu
ranc
e C
o.ca
sual
ty in
sura
nce
men
t Man
agem
ent
nec
Kin
gdom
115
1.6
EM
TV
&
Mot
ion-
pict
ure
and
SLE
C H
oldi
ngs
Ltd
.O
ffice
s of
hol
ding
G
erm
any
The
Uni
ted
Mer
chan
disi
ng A
Gvi
deot
ape
dist
ribu
-co
mpa
nies
, nec
Kin
gdom
tion
116
1.6
For
tis
(NQ
NV
)L
ife
insu
ranc
eB
anqu
e G
ener
ale
Ban
ks, n
on-U
.S.
The
Net
herl
ands
Lux
embo
urg
du L
uxem
bour
gch
arte
red
117
1.6
Vol
ksw
agen
AG
Mot
or v
ehic
les
and
Scan
ia A
B (I
nves
tor
Tru
ck a
nd b
us
Ger
man
ySw
eden
pass
enge
r-ca
r bo
dies
AB
)bo
dies
118
1.6
BP
Am
oco
PL
CP
etro
leum
refi
ning
Vas
tar
Res
ourc
es
Cru
de p
etro
leum
T
he U
nite
d T
he U
nite
d St
ates
Inc.
and
natu
ral g
asK
ingd
om
119
1.6
US
Food
serv
ice
Inc.
Gro
ceri
es, g
ener
al
PY
A/M
onar
ch I
nc.
Gro
ceri
es, g
ener
al
The
Uni
ted
Stat
esT
he U
nite
d St
ates
line
line
120
1.6
Spir
ent P
LC
Ele
ctro
nic
com
po-
Hek
imia
n L
abs
Inc.
Ele
ctri
cal a
ppar
atus
T
he U
nite
d T
he U
nite
d St
ates
nent
s, n
ecan
d eq
uip
Kin
gdom
121
1.6
Ban
co S
anta
nder
N
atio
nal c
omm
er-
Cia
de
Segu
ros
Lif
e in
sura
nce
Spai
nPo
rtug
alC
entr
al H
ispa
nci
al b
anks
Mun
dial
122
1.5
Ban
co S
anta
nder
N
atio
nal c
omm
er-
Gru
po F
inan
cier
o B
anks
, non
-U.S
. Sp
ain
Mex
ico
Cen
tral
His
pan
cial
ban
ksSe
rfin
SA d
ech
arte
red
123
1.5
Vol
vo A
BM
otor
veh
icle
s an
d R
enau
lt V
I/M
ack
Indu
stri
al tr
ucks
, Sw
eden
Fra
nce
pass
enge
r-ca
r bo
dies
(Ren
ault
SA
)tr
acto
rs, t
raile
rs a
nd
stac
kers
124
1.5
Bri
tish
Sky
Bro
ad-
Cab
le a
nd o
ther
pay
K
irch
Pay
TV
Gm
bH
Cab
le a
nd o
ther
pay
T
he U
nite
d G
erm
any
cast
ing
Gro
upte
levi
sion
ser
vice
s(K
irch
Gru
ppe)
tele
visi
on s
ervi
ces
Kin
gdom
125
1.5
Saud
i Tel
ecom
mu-
Tel
epho
ne c
omm
u-F
LA
G T
elec
om
Tel
egra
ph a
nd o
ther
Sa
udi A
rabi
aB
erm
uda
nica
tion
s C
cni
cati
ons,
exc
ept
Hol
ding
s L
td.
mes
sage
com
mun
i-ra
diot
elep
hone
cati
ons
126
1.5
Ade
cco
SAE
mpl
oym
ent
Ols
ten
Cor
p.H
elp
supp
ly s
ervi
ces
Swit
zerl
and
The
Uni
ted
Stat
esag
enci
es
127
1.5
Old
Mut
ual P
LC
Lif
e in
sura
nce
Uni
ted
Ass
et
Inve
stm
ent a
dvic
eSo
uth
Afr
ica
The
Uni
ted
Stat
esM
anag
emen
t Cor
p.
128
1.5
Cad
bury
C
andy
and
oth
er
Snap
ple
Bev
erag
e B
ottl
ed &
can
ned
The
Uni
ted
The
Uni
ted
Stat
esSc
hwep
pes
PL
Cco
nfec
tion
ery
Gro
up I
nc.
soft
dri
nks
and
car-
Kin
gdom
prod
ucts
bona
ted
wat
ers
129
1.4
Fos
ter’s
Bre
win
g M
alt b
ever
ages
Ber
inge
r W
ine
Win
es, b
rand
y, a
nd
Aus
tral
iaT
he U
nite
d St
ates
Gro
up L
td.
Est
ates
Hol
ding
sbr
andy
spi
rits
130
1.4
Cit
izen
s F
inan
cial
Sa
ving
s in
stit
utio
ns,
UST
Cor
p. B
osto
n,
Stat
e ba
nks,
T
he U
nite
d St
ates
The
Uni
ted
Stat
esG
roup
, R1
not f
eder
ally
cha
r-M
Am
embe
r-fe
d re
serv
ete
red
131
1.4
Cor
ning
Inc
.T
elep
hone
and
tele
-Si
emen
s A
G-O
ptic
al
Dra
win
g an
d in
su-
The
Uni
ted
Stat
esG
erm
any
grap
h ap
para
tus
Fib
er, C
able
lati
ng o
f non
ferr
ous
wir
e(c
onti
nued
)
Tab
le 1
1A.1
(con
tinu
ed)
Acq
uiri
ng C
ompa
nyA
cqui
red
Com
pany
Hea
dqua
rter
s L
ocat
ion
Val
ue o
fC
ross
-Bor
der
Tra
nsac
tion
Ran
k($
bill
ions
)N
ame
Indu
stry
Nam
eIn
dust
ryA
cqui
ring
Fir
mA
cqui
red
Fir
m
132
1.4
Lit
taue
r T
echn
ol-
Com
pute
r-re
late
d A
siaN
et (L
inka
ge
Info
rmat
ion-
The
Rep
ublic
of
Hon
g K
ong,
ogie
s C
c L
td.
serv
ices
, nec
On-
Lin
e)re
trie
val s
ervi
ces
Kor
eaC
hina
133
1.4
Inve
stor
Gro
upIn
vest
ors,
nec
Pow
erco
r A
ustr
alia
E
lect
ric
serv
ices
Hon
g K
ong,
Chi
naA
ustr
alia
(Pac
ifC
orp)
134
1.4
Smur
fit-S
tone
P
aper
boar
d m
ills
St. L
aure
nt P
aper
-P
aper
boar
d m
ills
The
Uni
ted
Stat
esC
anad
aC
onta
iner
Cor
p.bo
ard
Inc.
135
1.4
BN
P P
arib
as S
AB
anks
, non
-U.S
. C
ie B
enel
ux P
arib
as
Mis
c bu
sine
ss c
redi
tF
ranc
eB
elgi
umch
arte
red
SA
136
1.4
Kon
inkl
ijke
PT
T
Tel
epho
ne c
omm
u-H
utch
ison
3G
UK
T
elep
hone
com
mu-
The
Net
herl
ands
The
Uni
ted
Ned
erla
nd N
Vni
cati
ons,
exc
ept
Hol
ding
s L
td.
nica
tion
s, e
xcep
t K
ingd
omra
diot
elep
hone
radi
otel
epho
ne
137
1.3
Dim
ensi
on D
ata
Pre
pack
aged
C
ompa
rex-
Eur
C
ompu
ter-
Sout
h A
fric
aG
erm
any
Hol
ding
s P
LC
soft
war
eN
etw
orki
ng O
pspr
ogra
mm
ing
serv
ices
138
1.3
Stan
dard
Cha
rter
ed
Inve
stm
ent a
dvic
eA
NZ
Gri
ndla
ys
Ban
ks, n
on-U
.S.
The
Uni
ted
Aus
tral
iaP
LC
Ban
k L
td.
char
tere
dK
ingd
om
139
1.3
Stan
dard
Cha
rter
ed
Inve
stm
ent a
dvic
eC
hase
Man
hatt
an-
Ban
ks, n
on-U
.S.
The
Uni
ted
Hon
g K
ong,
P
LC
HK
Ban
king
char
tere
dK
ingd
omC
hina
140
1.3
Tel
ia A
BT
elep
hone
com
mu-
Net
Com
ASA
Inve
stor
s, n
ecSw
eden
Nor
way
nica
tion
s, e
xcep
t ra
diot
elep
hone
141
1.3
AE
S C
orp.
Ele
ctri
c se
rvic
esG
ener
SA
Ele
ctri
c se
rvic
esT
he U
nite
d St
ates
Chi
le
142
1.3
BT
Bum
i Mod
ern
Cru
de p
etro
leum
G
allo
Oil
Ltd
.C
rude
pet
role
um
Indo
nesi
aT
he U
nite
d St
ates
and
natu
ral g
as,
and
natu
ral g
as
radi
otel
epho
nepr
oduc
tion
143
1.3
Viv
endi
SA
Wat
er s
uppl
yE
lekt
rim
T
elep
hone
com
mu-
Fra
nce
Pola
ndT
elek
omun
ikac
ja S
pni
cati
ons,
exc
ept
radi
otel
epho
ne
144
1.3
Sing
apor
e Po
wer
E
lect
ric
serv
ices
GP
U P
ower
Net
Pty
C
ombi
nati
on
Sing
apor
eA
ustr
alia
Pte
Ltd
.L
td.
utili
ties
, nec
145
1.3
Eni
SpA
Cru
de p
etro
leum
B
riti
sh B
orne
o O
il C
rude
pet
role
um
Ital
yT
he U
nite
d an
d na
tura
l gas
& G
as P
LC
and
natu
ral g
asK
ingd
om
146
1.3
Inte
l Cor
p.Se
mic
ondu
ctor
s G
iga
A/S
(NK
T
Ele
ctro
nic
com
po-
The
Uni
ted
Stat
esD
enm
ark
and
rela
ted
devi
ces
Hol
ding
)ne
nts,
nec
147
1.2
Tel
ia A
BT
elep
hone
com
mu-
Net
Com
ASA
Inve
stor
s, n
ecSw
eden
Nor
way
nica
tion
s, e
xcep
t ra
diot
elep
hone
148
1.2
Info
sour
ces
SAIn
form
atio
n-B
elga
com
Sky
net S
AIn
form
atio
n-F
ranc
eB
elgi
umre
trie
val s
ervi
ces
retr
ieva
l ser
vice
s
149
1.2
Ass
a A
bloy
AB
Har
dwar
e, n
ecW
illia
ms
PL
C-Y
ale
Har
dwar
e, n
ecSw
eden
The
Uni
ted
Loc
ksK
ingd
om
150
1.2
Rel
iant
Ene
rgy
Ele
ctri
c se
rvic
esE
nerg
iepr
oduk
tie-
Ele
ctri
c se
rvic
esT
he U
nite
d St
ates
The
Net
herl
ands
bedr
ijf U
NA
NV
(con
tinu
ed)
Tab
le 1
1A.1
(con
tinu
ed)
Acq
uiri
ng C
ompa
nyA
cqui
red
Com
pany
Hea
dqua
rter
s L
ocat
ion
Val
ue o
fC
ross
-Bor
der
Tra
nsac
tion
Ran
k($
bill
ions
)N
ame
Indu
stry
Nam
eIn
dust
ryA
cqui
ring
Fir
mA
cqui
red
Fir
m
151
1.2
Uni
cred
ito
Ital
iano
Ban
ks, n
on-U
.S.
Pio
neer
Gro
up I
nc.
Inve
stm
ent a
dvic
eIt
aly
The
Uni
ted
Stat
esch
arte
red
152
1.2
Hei
delb
erge
r C
emen
t, h
ydra
ulic
Cim
ente
ries
CB
R
Cem
ent,
hyd
raul
icG
erm
any
Bel
gium
Zem
ent A
G(H
eide
lber
ger)
153
1.2
Inve
stor
Gro
upIn
vest
ors,
nec
Fai
rchi
ld A
eros
pace
A
ircr
aft
Ger
man
yT
he U
nite
d St
ates
Cor
p.
154
1.2
GN
Sto
re N
ord
A/S
Rad
io &
TV
bro
ad-
Pho
tone
tics
SA
Mea
suri
ng &
con
-D
enm
ark
Fra
nce
cast
ing
and
com
mu-
trol
ling
devi
ces
nica
tion
s eq
uipm
ent
155
1.2
Mor
gan
Stan
ley
Rea
l-es
tate
-F
onsp
a-N
on-
Per
sona
l-cr
edit
T
he U
nite
d St
ates
Ital
yR
eal E
stat
ein
vest
men
t tru
sts
Per
form
ing
Loa
nsin
stit
utio
ns
156
1.2
K-L
Hol
ding
s In
c.
Inve
stor
s, n
ecL
apor
te-N
on
Inor
gani
c pi
gmen
tsT
he U
nite
d St
ates
The
Uni
ted
(KK
R)
Spec
ialit
y O
rgan
icK
ingd
om
157
1.1
Inve
stor
Gro
upIn
vest
ors,
nec
Lon
g T
erm
Cre
dit
Ban
ks, n
on-U
.S.
The
Uni
ted
Stat
esJa
pan
Ban
k of
Jap
anch
arte
red
158
1.1
Dan
zas
Hol
ding
A
rran
gem
ent o
f A
ir E
xpre
ss I
nter
-A
rran
gem
ent o
f Sw
itze
rlan
dT
he U
nite
d St
ates
AG
tran
spor
tati
on o
f na
tion
al C
orp.
tran
spor
tati
on o
f fr
eigh
t and
car
gofr
eigh
t and
car
go
159
1.1
Alli
anz
AG
Lif
e in
sura
nce
PIM
CO
Adv
isor
s In
vest
men
t adv
ice
Ger
man
yT
he U
nite
d St
ates
LP
160
1.1
Deu
tsch
e T
elek
om
Rad
iote
leph
one
Pols
ka T
elef
onia
C
omm
unic
atio
ns
Ger
man
yPo
land
AG
com
mun
icat
ions
Cyf
row
a Sp
serv
ices
, nec
161
1.1
Bill
iton
PL
CM
isce
llane
ous
Rio
Alg
om L
td.
Ura
nium
-rad
ium
The
Uni
ted
Can
ada
met
al o
res,
nec
vana
dium
ore
sK
ingd
om
162
1.1
Dan
one
Gro
upF
luid
milk
McK
esso
n W
ater
B
ottl
ed &
can
ned
Fra
nce
The
Uni
ted
Stat
esP
rodu
cts
Cc
soft
dri
nks
and
car-
bona
ted
wat
ers
163
1.1
Tho
mso
n C
orp.
New
spap
ers:
pub
-P
rim
ark
Cor
p.C
ompu
ter-
rela
ted
Can
ada
The
Uni
ted
Stat
eslis
hing
or
publ
ishi
ng
serv
ices
, nec
and
prin
ting
164
1.1
Tha
mes
Wat
er P
LC
Wat
er s
uppl
yE
’ tow
n C
orp.
Wat
er s
uppl
yT
he U
nite
d T
he U
nite
d St
ates
Kin
gdom
165
1.1
Fal
ck H
oldi
ng A
/SD
etec
tive
, gua
rd,
Gro
up 4
Sec
urit
as
Det
ecti
ve, g
uard
, D
enm
ark
The
Net
herl
ands
and
arm
ored
-car
(I
ntl)
BV
and
arm
ored
-car
se
rvic
esse
rvic
es
166
1.1
Dia
mon
d T
echn
ol-
Man
agem
ent-
Clu
ster
Con
sult
ing
Bus
ines
s co
nsul
ting
T
he U
nite
d St
ates
Spai
nog
y P
artn
ers
cons
ulti
ng s
ervi
ces
serv
ices
, nec
167
1.1
Uni
ted
Pan
-Eur
ope
Com
mun
icat
ions
E
neco
C&
TC
able
and
oth
er p
ay
The
Net
herl
ands
The
Net
herl
ands
Com
m N
Vse
rvic
es, n
ecte
levi
sion
ser
vice
s
168
1.1
Gen
eral
Mot
ors
Mot
or v
ehic
les
and
Fuj
i Hea
vy I
ndus
-M
otor
veh
icle
s an
d T
he U
nite
d St
ates
Japa
nC
orp.
pass
enge
r-ca
r bo
dies
trie
s L
td.
pass
enge
r-ca
r bo
dies
169
1.1
Bip
op-C
arir
eB
anks
, non
-U.S
. E
ntri
um D
irec
t In
form
atio
n-It
aly
Ger
man
ych
arte
red
Ban
kers
AG
retr
ieva
l ser
vice
s(c
onti
nued
)
Tab
le 1
1A.1
(con
tinu
ed)
Acq
uiri
ng C
ompa
nyA
cqui
red
Com
pany
Hea
dqua
rter
s L
ocat
ion
Val
ue o
fC
ross
-Bor
der
Tra
nsac
tion
Ran
k($
bill
ions
)N
ame
Indu
stry
Nam
eIn
dust
ryA
cqui
ring
Fir
mA
cqui
red
Fir
m
170
1.0
Kon
inkl
ijke
Phi
lips
Hou
seho
ld a
udio
M
edQ
uist
Inc
.D
ata-
proc
essi
ng
The
Net
herl
ands
The
Uni
ted
Stat
esE
lect
roni
can
d vi
deo
equi
p-se
rvic
esm
ent
171
1.0
Am
docs
Ltd
.C
ompu
ter-
prog
ram
-So
lect
Tec
holo
gy
Pre
pack
aged
T
he U
nite
d C
anad
am
ing
serv
ices
Gro
upso
ftw
are
Kin
gdom
172
1.0
Wen
gen
Inve
stor
s, n
ecW
assa
il P
LC
Mot
or-v
ehic
le p
arts
T
he U
nite
d St
ates
The
Uni
ted
Acq
uisi
tion
PL
Can
d ac
cess
orie
sK
ingd
om
173
1.0
Inve
stor
Gro
upIn
vest
ors,
nec
Cia
Ene
rget
ica
de
Ele
ctri
c se
rvic
esSp
ain
Bra
zil
Per
nam
buco
174
1.0
Kyo
cera
Cor
p.Se
mic
ondu
ctor
s Q
UA
LC
OM
M-
Rad
iote
leph
one
Japa
nT
he U
nite
d St
ates
and
rela
ted
devi
ces
Lan
d-B
ased
Wir
ele
com
mun
icat
ions
175
1.0
Ban
co S
anta
nder
N
atio
nal c
omm
er-
Ban
co B
ozan
o B
anks
, non
-U.S
. Sp
ain
Spai
nB
razi
lC
entr
al H
ispa
nci
al b
anks
Sim
onse
n SA
char
tere
d
References
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Berger, Allen N., Robert DeYoung, Hensa Genay, and Gregory F. Udell. 2000.Globalization of financial institutions: Evidence from cross-border banking per-formance. In Brookings-Wharton Papers on Financial Services: 2000, ed. Rob-ert E. Litan and Anthony M. Snatomero, 23–158. Washington, D.C.: BrookingsInstitution.
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Black, Bernard S. 2000a. Is this the first international merger wave? M&A Lawyer(July/August): 20–26.
———. 2000b. The first international merger wave (and the fifth and last U.S.wave). University of Miami Law Review 54:799–818.
Calomiris, Charles W., and Jason Karceski. 2000. Is the bank merger wave of the1990s efficient? Lessons from nine case studies. In Mergers and productivity, ed.Steven N. Kaplan, 93–178. Cambridge, Mass.: National Bureau of EconomicResearch.
Carow, Kenneth A., and Edward J. Kane. 2002. Event-study evidence on the valueof relaxing longstanding regulatory restraints on banks, 1970–2000. QuarterlyJournal of Economics and Finance 43 (summer): 649–71.
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The Cross-Border Mergers and Acquisitions Wave of the Late 1990s 465
Table 11A.2 Major Regulatory Changes Affecting the Banking Sectors of the Thirteen OECDNations Considered in This Paper
OECD Nation Year Short Description of Regulatory Change
The United States 1994 Implementation of the Reigle Neal Interstate Act1999 Implementation of the Gramm-Leach-Billey Act
Canada 1992 Phasing out of banking-reserve requirements1999 Relaxation of rules allowing establishment of foreign banks
Australia 1992 Relaxation of rules allowing establishment of foreign banks1997 End of the so-called Six Pillars policy
France 1993 Privatization of some banks1995 Implementation of a deposit-insurance directive
Germany 1992 Implementation of second European Banking DirectiveItaly 1993 Implementation of second European Banking Directive
1994 Privatization of some banksThe United Kingdom 1998 Financial Services Authority takes on some bank regulatory powers
Source: BIS (2001, annex II.3).Note: This table is not supposed to summarize all of the regulatory changes in the thirteen OECD na-tions during the years 1990 to 1999. Rather, using BIS (2001), it identifies that major regulatory changesthat affected a nation’s banking sector during the years that it was in the unbalanced panel. Therefore, ifa nation was in the unbalanced panel from 1990 to 1993, changes in the regulatory regime for banks af-ter 1993 would not be reported.
Dermine, Jean. 1999. The economics of bank mergers in the European Union, a re-view of the public policy issues. INSEAD, Finance Department. Mimeograph.
Evenett, Simon J. 2002. How much have merger review laws reduced cross bordermergers and acquisitions? In International merger control: Prescriptions for con-vergence, ed. William K. Rowley. London: International Bar Association.
———. 2003a. A study on issues relating to a possible multilateral framework oncompetition policy. Report commissioned by the Secretariat of the World TradeOrganization (WTO), no. WT/WGTCP/W/228, May 2003. Geneva, Switzer-land: WTO.
———. 2003b. Do all networks facilitate international commerce? U.S. law firmsand the international market for corporate control. NBER Working Paper no.9663. Cambridge, Mass.: National Bureau of Economic Research, May.
———. 2003c. What future for regional competition policy in Latin America? InBridges for Development: Policies and Institutions for Trade and Integration, ed.Robert Devlin and Antoni Estevad Cordal, 229–55. Washington, D.C.: TheInterAmerican Development Bank, forthcoming.
Evenett, Simon J., Alexander Lehmann, and Benn Steil, eds. 2000. Antitrust goesglobal: What future for transatlantic cooperation? Washington, D.C.: The Brook-ings Institution Press.
Feliciano, Zadia, and Robert E. Lipsey. 2002. Foreign entry in U.S. manufacturingby takeovers and the creation of new firms. The City University of New York(CUNY), Queens College and the Graduate Center. Mimeograph.
Hoekman, Bernard M., and Petros C. Mavroidis. 2003. Economic development,competition policy and the WTO. Journal of World Trade 37 (1): 1–27.
International Competition Policy Advisory Committee (ICPAC). 2000. Final re-port. Washington, D.C.: GPO.
Kang, Nam-Hoon, and Sara Johansson. 2000. Cross-border mergers and acquisi-tions: Their role in industrial globalisation. Science, Technology, and Industry(STI) Working Paper no. 2000/1. Paris: Organization for Economic Cooperationand Development (OECD).
Levenstein, Margaret C., and Valerie Y. Suslow. 2001. Private international cartelsand the effect on developing countries. Background Paper to the World develop-ment report 2001. Washington, D.C.: World Bank.
Mehta, Pradeep, and Nitya Nanda. 2003. Competition issues with international di-mensions: How do developing countries deal with them? Consumer Union TrustSociety (CUTS) Centre on Competition, Investment and Economic Regulation,Jaipur, India. Mimeograph.
Mody, Ashoka, and Shoko Negishi. 2000. Cross-border mergers and acquisitionsin East Asia: Trends and implications. Finance and Development 38 (1): 6–9.
Muris, Timothy J. 2001. Merger enforcement in a world of multiple arbiters. Paperpresented at the Brookings Roundtable on Trade and Investment Policy. De-cember 21, 2001, Washington, D.C.
Neven, Damien, and Lans Henrik Roller. 2000. The allocation of jurisdiction in in-ternational antitrust. European Economic Review 44 (5): 845–55.
Organization for Economic Cooperation and Development (OECD). 2001. Newpatterns of industrial globalisation: Cross-border mergers and acquisitions andstrategic alliances. Paris: OECD.
———. 2003. Second report by the Competition Committee on Effective ActionAgainst Hard Core Cartels. Paris: OECD.
Pryor, Frederic M. 2001. Dimensions of the worldwide merger boom. Journal ofEconomic Issues, forthcoming.
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466 Simon J. Evenett
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Vives, Xavier. 2001. Competition in the changing world of banking. Oxford Reviewof Economic Policy 17 (4): 535–47.
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Comment Rod Falvey
The success of multilateral trade negotiations in reducing barriers to tradeand investment flows, and the extensive programs of deregulation and pri-vatization that have taken place in many countries, have opened up theirdomestic markets to greater competition from foreign firms. In traded-goods markets this competition can come through increased flows of prod-ucts across borders. For nontraded goods it comes from the establishmentof foreign-owned suppliers, through greenfield FDI or cross-border merg-ers and acquisitions (CBMA).
This chapter investigates the CBMA wave of the late 1990s. Section 11.2describes this wave in some detail. This material provides us with a usefulpicture of the characteristics and magnitudes of the CBMA wave of the1990s, both in absolute terms and relative to the smaller wave that occurredin the previous decade. Two points stand out: the relative importance of“mega deals” (those involving assets over $1 billion), and the concentra-tion in a small number of service sectors, which are “pretty much immuneto import competition.”
I have two comments on this part of the paper, both concerned with therole and measurement of regulatory policies. The author observes that, incontrast to the general liberalization of policies toward greenfield FDI,national policies toward mergers and acquisitions (both within and acrossborders) may have become more stringent throughout the 1990s. The spe-cific point made is that there has been an increase in the number of juris-dictions (including both developed and developing countries) with mergerreview requirements. Although the two are not inconsistent, this claimdoes sit rather awkwardly with the evidence on the magnitude of thismerger wave, and appears to deserve further investigation. Controls forregulatory changes are included in the econometric analysis in section
The Cross-Border Mergers and Acquisitions Wave of the Late 1990s 467
Rod Falvey is the Leverhulme Professor of International Economics at the University ofNottingham.
11.3, and appear to have significant effects, but it is not clear whether thisevidence indicates that regulators have become less lenient.
The author also comments that CBMAs may have economic effects thatspill across national boundaries and that will not be taken into accountby regulators. Thus, a CBMA may be vetoed in some jurisdictions eventhough its net global effects are positive. Of course, the same can be true ofwithin-border MAs, whose economic effects can also extend across inter-national boundaries. One might be concerned that a merger toward mo-nopoly is more likely to be approved by national regulators in cases whereexports are significant. Mergers and acquisitions can generate terms-of-trade effects which are gains for some jurisdictions, but which net out at theglobal level. The case for international cooperation may be stronger thanis claimed.
Section 11.3 then undertakes an econometric investigation of whetherCBMAs in the banking sector have resulted in greater or smaller interestrate spreads in thirteen OECD countries. This analysis raises a number ofinteresting issues.
First, the underlying argument is that the output of banks is financial in-termediation, and that the interest rate spread is the “price” of such inter-mediation. Unless the diversity of spreads across nations (as shown in table11.7) can be argued to reflect differences in other charges (e.g., fixed feesand transactions charges) for financial intermediation across jurisdictions,this seems to provide strong evidence that these national markets are farfrom internationally integrated.
Second, the summary statistics in table 11.7 (particularly those relatingto the number of banks and the five-firm concentration ratios) suggest thatit is very unlikely that all banks are offering the same range of financialintermediation services. This heterogeneity may help to explain the limitedexplanatory power of the model.
Third, both the summary data in tables 11.5 and 11.6 and the econo-metric results suggest that (a) mergers and acquisitions and (b) joint ven-tures and strategic alliances (JVSAs) perform rather different roles in thebanking sector. While within-border mergers and acquisitions are far morecommon than CBMAs, for nine of the countries cross-border JVSAs arethe more common. It would be useful to know more about the similaritiesand differences between these linkages, particularly since the econometricresults indicate that JVSAs tend to raise the interest rate spread. AreJVSAs allowing banking firms to circumvent regulatory controls? In par-ticular, can firms substitute some form of JVSA, where they suspect amerger or acquisition would not be approved?
Fourth, the author notes that mergers and acquisitions have two po-tentially opposing influences on the interest rate spread in general: theyreduce the number of competitors (the “market power” effect) and (may)increase average efficiency. That CBMAs will reduce the number of com-
468 Simon J. Evenett
petitors seems relatively straightforward for traded goods, but is less clearcut for nontraded goods and services, where the CBMA could signal theentry of an efficient foreign competitor. In common with the rest of theempirical literature, the econometric analysis uses a number of variablesto explain the interest rate spread. Unfortunately, the links between thesevariables and the two effects are not always clear cut. Perhaps a simpleCournot model might clarify the issues. Let s denote the interest ratespread, and suppose the demand for financial intermediation can be rep-resented by a simple linear function d � D – s. There are n banks, and bankj has constant unit cost cj . Then the equilibrium spread is s e � (D � nc�) /(n � 1), where c� � ( ∑n
j�1cj /n) is the average unit cost. The macroeconomiccontrols would then work through D. In general, we would expect merg-ers and acquisitions to reduce both n and c�. The former would raise theequilibrium spread, but the latter would reduce it. Since the regressionequations control for the number of firms, the merger and acquisitionvariables should be capturing the effect on “average efficiency.” The evi-dence suggests that CBMAs into the European Union (EU) have in-creased average efficiency. There is no evidence that the correspondingCBMAs outside the EU have changed average efficiency at all. One canalso use this model to solve for the five-firm concentration ratio, whichturns out to be
�5
n��1 ��
(n �
D
1)
�
(c�c�
� c�5 )��,
where c�5 is the average unit cost of the five largest (i.e., most efficient) firms.The value of this variable will also be affected by mergers and acquisitionsbut not in any straightforward fashion.
Finally, although this point should be fairly obvious, when the authoruses the estimated parameters to quantify the effects of mergers and ac-quisitions and of strategic alliances on interest rate spreads, readers shouldrecall that some of these calculations are based on parameters estimatedwith very limited precision.
The Cross-Border Mergers and Acquisitions Wave of the Late 1990s 469