Governments in the market for corporate control: Evidence from M&A deals involving state-owned enterprises

Recent evidence suggests that state-owned enterprises (SOEs) are increasingly taking over other firms. Such domestic or transborder acquisitions are the reverse of privatizations, where SOEs are the target of private investors. The question we ask is whether, because of the specific objectives and risks faced by governments, SOEs deviate from the benchmark of deals involving private firms on both sides of the merger and acquisition (M&A) transaction. To answer this new research question, we focus on a set of firm-level characteristics of the targets and acquirers involved in the deals. We built an original dataset of 31,479 deals in 138 countries drawing from Zephyr and Orbis (Bureau Van Dijk) data. Empirical results of multinomial logit and OLS models show that deals involving SOEs are clearly different from the benchmark of private-private deals. This is mainly due to the greater assets, higher solvency ratios, broader experience of deals, and closer proximity to targets of the acquirers (both public and private) under public-private, public-public, and private-public deals compared to private-private deals.