Using acquisitions to access multinational diversity: thinking beyond the domestic versus cross-border M&A comparison

Abstract

Prior research provides ambiguous results regarding the performance of international acquisitions. Drawing on a survey of 248 acquisitions, we find that acquirers enhance their capabilities when they buy a target with a multinational geographic scope. A financial event study uses a subsample of the acquisitions to show that the financial markets also value targets’ multinational scope. Both surveys and stock market-based studies suggest that targets with access to heterogeneous resource environments provide the acquirer with greater potential for capability enhancement and financial performance. In contrast, simply acquiring firms across borders has less influence on post-acquisition outcomes. The study demonstrates greater value of the attributes of the target rather than of international expansion alone. Thus, the multinational scope of the target is more likely to account for the resource diversity provided by the target than the country of origin of the target per se. The study changes the emphasis on multinational acquisitions, by shifting the focus from foreign market expansion (country-level emphasis) to accessing geographically distributed resources that are embedded in target firms (firm-level emphasis).