The alchemy of acquisition currency: exclusive advantages of listed companies

Abstract

Purpose -Acquisition currency is the possibility, enjoyed mainly by listed companies, of paying for acquisitions with paper (i.e. with conversion shares) instead of financial means, decreasing the participating share of the controlling shareholder as little as possible. The paper seeks to address the issues. Design/methodology/approach -The paper describes an original model to deal with the conceptual framework of the problem. Findings -The acquisition currency game is interesting and it is worth playing it. It is clear that at a certain point the mechanism breaks and it is useful to see what happens. A mechanism that continues to increase the P/E does not exist; at a certain point there must be a limit. Originality/value -The paper illustrates that the model convincingly describes some current behaviour of stock exchange prices and alerts about some dangerous situations.

Why do firms cross‐list their shares on foreign exchanges? A review of cross‐listing theories and empirical evidence

“…Finally, cross‐listing enhances the firm's visibility in the host country where the firm is planning expansion via mergers and acquisitions and provides the firm with an acquisition currency, a foreign exchange‐listed security that is valid in the foreign country to pay for acquisitions in that country[14]. Empirically, there is evidence that non‐US firms cross‐listed in the USA are significantly more active in acquiring US firms (Tolmunen and Torstila, 2005; Tagliavini, 2008) and, compared to their domestically listed peers, pay less by using US‐listed equity rather than cash (Burns, 2004).…”