Do cross-border acquisitions of U.S. targets differ from U.S. domestic takeover targets?

Abstract

This paper examines whether cross-border acquisitions in the U.S. focus more on technology intensive targets than do domestic acquisitions. In addition to the technology effect, are there any other reasons why a firm is more likely to be a foreign target than a domestic target? The empirical results indicate significant difference between foreign and domestic target characteristics such as technology, size, liquidity, profitability, Q ratio, and growth. Among them, technology, liquidity, and profitability are the determinants for the choices between foreign and domestic takeover targets. Surprisingly, the R&D expenditures of U.S. targets in cross-border acquisitions are relatively lower than those of domestic targets. Moreover, U.S. targets of cross-border takeovers are financially worse than U.S. targets of domestic takeovers. In general, the predicting ability of logit models for cross-border targets is better than that for domestic targets, but it is only marginally better than random prediction.