Cross-Border Acquisitions: A Country-Level Analysis

Country-level factors play an important role in the success or failure of cross-border acquisitions, defined as acquisitions where the acquiring firm and the target firm are in two different countries. If we are to understand and improve the success rates of these acquisitions, we must explore this issue in more depth. As globalization continues to emerge around the world, cross-border acquisitions have become a common way to enter a new foreign market. There is limited research available so far for these acquisitions on the country-level. Currently, cross-border acquisitions have failure rates of up to 70%. We analyze acquisition premium and use three dimensions of distance administrative, economic, and financial, to understand how these country-level factors affect the performance of cross-border acquisitions. We collected data on acquisitions announced between 2011 and 2014 from the SEC database. We have 108 deals in our final sample used to conduct the statistical analyses. We found that while premium is negatively related to acquisition performance, this relationship is contingent on administrative and financial distances