Abstract
Achieving successful integration of mergers and acquisitions (M&A) continues to pose serious challenges for cross-border acquirers. The aim of this paper was to analyze the impact of cross border M&A on bidder and target companies’ post-M&A profitability, leverage and growth in sales/invested capital. We used a sample of 415 Italian bidder companies and 370 Italian target companies over the period of 2006-2013. Our analysis suggests that the cultural distance exerts positive effects on bidder companies’ post-M&A performance and a negative effect on target companies. Bidder companies better exploit the source of value in terms of competencies and resources, learning from their counterparties. The results suggest that the effect of culture distance is conditioned by the acquirer size, prior experience and managerial capabilities in dealing with cross-border cultural challenges. Profitability ratios show a significant increase in bidder companies, while target companies do not reveal any significant change in the comparison pre-post M&A. Leverage reveals no significant difference in bidder companies, while target companies have a higher leverage after a cross-border M&A. In cross-border M&A, the private equity funds as acquirer do not generate any incremental benefit from the target companies’ post M&A performance.
Highlights
The mergers and acquisitions (M&A) market is expanding globally to new countries and new sectors
The paper is divided into four sections: the first section is a literature review on M&A integration and cultural problems associated with combining organizations in cross-national settings; the second section explains the data and research methodology; the third section analyzes the results and presents some robustness tests of our models; the final section concludes with suggestions for future research
We focused on cross-border M&As, and in this field, some studies have indicated that M&As can have a negative impact on the economic performance of the new entity (Tetenbaum, 1999); (Cartwright & Cooper, 2011)
Summary
The M&A market is expanding globally to new countries and new sectors. The economic context is modifying the intensity and direction of cross-border M&As, updating continuously determinants and critical success factors of these operations. 2016 was a vibrant year for M&As, where deal volumes and deal counts supported substantial global uncertainty (geopolitical changes, heightened regulatory scrutiny and speculation around both Brexit and China) Notwithstanding all of these pressures, the market remained dynamic. Cross-border M&As accounted for approximately 70% of the total Italian market, versus 56% in 2016 These deals show a decreasing trend of value from 2015: € 31.6 bn in 2017 vs € 32.1 bn in 2016 vs € 42.3 bn in 2015. The aim of this paper was to build knowledge to analyze whether cross-border M&As created value in bidder and target companies, which are the potential determinants of cross-border deals completed and received by Italian companies in non-financial sectors from 2006 to 2013 in Asia, North America and the rest of Europe. Potential determinants of cross-border M&As on the bidder and target post-performance include cultural, economic and deal factors. The paper is divided into four sections: the first section is a literature review on M&A integration and cultural problems associated with combining organizations in cross-national settings; the second section explains the data and research methodology; the third section analyzes the results and presents some robustness tests of our models; the final section concludes with suggestions for future research
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