Public enterprises in the market for corporate control : recent worldwide evidence

This paper analyzes deals involving private and public enterprises, i.e. State-Owned Enterprises (SOEs) worldwide since 2004. We consider four types of deals: privatizations of SOEs, public enterprises acquiring private ones (public-private deals), private reorganizations (i.e private firms acquiring a private target) and public reorganizations. (i.e. both acquirer and target are SOEs). We study whether the pre-deal performance and corporate characteristics of the acquirer and target companies vary across the four types of deals depending on ownership: public or private. Data are taken from Zephyr (Bureau Van Dijk), which provides information on completed deals worldwide and Orbis, a firm-level dataset (also implemented by BvD). Some results of previous literature on M&As performed by private firms ('the inefficiency management hypothesis') are both confirmed and expanded. Acquirers involved in deals are both larger and better performing than their targets but some qualifications are in order with respect to ownership. The difference in size and performance between acquirers and targets is in fact more pronounced for public with respect to private acquirers. The evidence thus points to an active role of SOEs as acquirers, as they significantly out-perform relative to their targets, including private ones, in terms of return on sales. Given these novel findings, further research is needed to examine the motivations behind the different types of deals considered and to verify the role of government ownership in the contemporary global economy.