What Influences M&A Premium in Cross-border and Domestic Deals: Empirical Evidence from Developing and Emerging Countries

M&A (Merger&Acquisition) activity has gained popularity in recent years both in developed and developing countries, which made it a prominent topic for a scholar investigation. As one of the most important and common characteristics inherent in an M&A deal premium paid has become an aspect that has become the object of a particular attention. Even though scholars derived factors that affect how much the acquirer is ready to overpay for a target, there are certain limitations of such investigations. Developing and emerging economies are not covered to a sufficient extent, previous studies ignore the deals completed after the 2020 and the influence of some factors that influence the amount paid for a target is still uncertain. The aim of this study is to find out a degree of influence of different factors on the premium paid for the companies being the targets in M&A deals that are headquartered in emerging or developing countries. The results of the analysis are distinguished for cross-border and domestic deals. The reason for such a differentiation is that in previous studies empirically the different nature of the factors that influence the M&A premium has been determined. Using the multiple linear regression model and step-wise regression approach based on 52 domestic and 57 cross-border M&As data collected from Capital IQ database the following results are derived: the results of the regression analysis for the cross-border deals are that the premium size in the cross-border deals is positively affected by the percent of the ownership that the acquirer gets, which is in line with the results of the previous studies (Moran, 2001). However, the second outcome – positive influence of the size of the target on the size of a premium – is contradictory with the results obtained by other scholars. Three factors that have statistically significant positive impact on the deal premium size in domestic deals are the percent acquired, the size of the target and the D/E ratio. The results provide a better understanding of which factors deserve the most attention while deriving the price paid for a target. As a result, the companies participating in future M&A deals could understand which M&A premium size is fair and will not overpay for acquiring a certain target unreasonably.