What Matters in Cross-Border Acquisitions? A systematic review on performance factors in cross-border mergers and acquisitions

Abstract

Cross-border mergers and acquisitions have become one of the most important tools that firms have at their disposal for expanding abroad. Yet research has shown that the abnormal returns for the acquiring firms’ shareholders are usually negative or around zero. However, prior research has identified several factors that moderate the returns that result from the transactions. In the prior literature, the picture of the different factors wasn’t very clear. This paper aims to fill the gap by conducting a systematic review on the topic. Four primary factors are found to affect returns for acquiring firms’ shareholders in cross-border mergers and acquisitions. First, the investor-friendliness of the target country legal system affects the returns negatively. Second, acquirers that have more cross-border acquisition experience are able to get better returns. Third, cultural differences between the involved firms have complex but, on average, slightly positive effects. Fourth, acquisitions of technologically advanced targets produce better returns for the acquiring firms. After presenting the results, the implications of the results and possibilities for further research are assessed.