State Intervention in Cross-Border Mergers and Acquisitions

378 Pages·2017·13.07 MB·English

by  Ashley Lenihan

Balancing Power without Weapons
Whydostatesblocksomeforeigndirectinvestmentonnationalsecurity
grounds even when it originates from within their own security com-
munity? Government intervention into foreign takeovers of domestic
companies is on the rise, and many observers find it surprising that
statesengageinsuchbehaviornotonlyagainsttheirstrategicandmil-
itary competitors, but also against their closest allies. Ashley Thomas
Lenihanarguesthatsuchpuzzlingbehaviorcanbeexplainedbyrecog-
nizingthatstatesuseinterventionintocross-bordermergersandacqui-
sitions as a tool of statecraft to internally balance the economic and
military power of other states through non-military means. This book
tests this theory using quantitative and qualitative analysis of transac-
tionsintheUnitedStates,Russia,China,andfifteenEuropeanUnion
states.Itdeepensourunderstandingofwhystatesinterveneinforeign
takeovers, the relationship between interdependence and conflict, the
limitsofglobalization,andhowstatesarebalancingpowerinnewways.
ashley thomas lenihan is a fellow at the Centre for Inter-
national Studies at the London School of Economics and Political
Science,andatermmemberoftheCouncilonForeignRelations.Her
research focuses on the relationship between state power and foreign
directinvestmentfromaninternationalrelationsperspective.

Balancing Power without
Weapons
State Intervention into Cross-Border Mergers
and Acquisitions
Ashley Thomas Lenihan
LondonSchoolofEconomicsandPoliticalScience
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DOI:10.1017/9781316855430
(cid:2)C AshleyThomasLenihan2018
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This book is dedicated to my family – especially my
mother Judy, father Harry, husband Bob, and son
Bo – whose love, help, and support made this
possible. It is dedicated to my mentors and
colleagues who read countless drafts and held me to
the highest standard, with special thanks to George.
And finally, it is dedicated in loving memory to my
aunt Jan, who inspired me every day to be curious
about the world around us.

Contents
ListofFigures pageix
Preface xi
Acknowledgments xii
ListofAbbreviations xiii
Introduction 1
InternationalFinanceandInternationalSecurity 2
PuzzlingBehavior 4
InterventioninEmpiricalContext 7
PlacingtheTheorybehindInterventioninContext 16
TheSignificance 22
1 ATheoryofNon-MilitaryInternalBalancing 31
Introduction 31
NationalSecurityandForeignTakeovers 32
EconomicInterdependenceandPower 38
TheTheory 40
Methodology 55
Conclusion 61
2 TheNumbers:AssessingtheMotivationsBehindState
InterventionintoForeignTakeovers 70
Introduction 70
TheVariables 70
IndependentVariables 71
SpecificationoftheModelsandExpectedResults 75
Results 78
Conclusion 88
3 UnboundedIntervention:TheStateandtheBlocked
Deal 93
Introduction 93
DefiningUnboundedIntervention 94
CaseSelection 97
Case1:PepsiCo/Danone 100
Case2:CNOOC/Unocal 109
vii
viii Contents
Case3:CheckPoint/Sourcefire 134
Case4:Macquarie/PCCW 140
Conclusion 147
4 UnboundedorOverbalancing?AnOutlierCase 158
Introduction 158
Case5:DPW/P&O 159
Conclusion 185
5 BoundedIntervention:MitigatingThreatstoNational
Security 196
Introduction 196
DefiningBoundedIntervention 196
Case6:Alcatel/Lucent 216
Case7:Lenovo/IBM 231
Conclusion 244
6 Non-Interventionandthe“Internal”Intervention
Alternative 253
Introduction 253
PartI:Non-Intervention 253
Case8:CGG/Veritas 255
Case9:JPMorgan/TroikaDialog 257
PartII:InternalIntervention 267
Case10:GdF/Suez 271
Conclusion 278
Conclusion 281
TheTheoreticalContext 281
Non-MilitaryInternalBalancing 283
Significance 284
ConcludingThoughts 296
AppendixA AlternativeIndependentVariablesConsidered 299
AppendixB DescriptiveStatisticsofVariablesinMNLMs
I–IV 303
AppendixC MNLMIIIandResourceDependency 307
AppendixD DescriptiveStatisticsofDataset
Variables:Frequencies 309
AppendixE BivariateCorrelationsofDatasetVariables 310
AppendixF NegativeCaseSelection 311
References 314
Index 351