infonet-economy

From the economic point of view, common law is more efficient than civil law. Is this recent statement published in an economic report valid for mergers and acquisitions (M&A)? The main objective of this paper is to compare the legal performance of M&A in France and in the United States. The purpose is to quantify the impact of both legal systems on the long-term performance of M&A transactions. To carry out this research, a specific methodology was developed and the results of which are evaluated. Two legal structures for M&A transactions were envisaged: the purchase of shares (share deal), and the purchase of assets (asset deal). Each of these acquisition structures was then subdivided into eleven steps composing the process, for example from preliminary information, letter of intent, due diligence, stock or asset purchase agreement, closing, to litigation with formal summons. Performance was then measured by taking into account time, cost, and satisfaction factors. The time factor was broken down into person-days and the number of days, weeks, or months required to complete each step. French and U.S. respondents were asked to fill out a questionnaire with reference to a specific acquisition project. A typical question was for instance: What is your estimate of working days to complete this step (person-days)? Radar charts were used to compare the mean of each performance factor. In order to check for correlations among the performance factors, an inter-factors analysis (regression) was carried out. The research findings are presented in this paper. Results show that a share deal in France is generally cheaper and participants indicate a significantly greater amount of satisfaction than in the U.S. However, for the time factor, the results vary. The conclusion is that the application of Civil Law rules rather than their Common Law counterparts does not reveal substantial differences as far as M&A transactions are concerned. One reason is that in both France and the U.S. these transactions are carried out following standard procedures in compliance with common contractual practices.