IDEAS home Printed from https://ideas.repec.org/a/eee/iburev/v22y2013i5p894-904.html
   My bibliography  Save this article

The pre-acquisition evaluation of target firms and cross border acquisition performance

Author

Listed:
  • Ahammad, Mohammad Faisal
  • Glaister, Keith W.

Abstract

The paper investigates the impact of the pre-acquisition evaluation of target firms on the performance of cross border acquisitions using data from a sample of acquisitions made by UK firms. The findings provide reasonable support for organizational learning theory, suggesting that the more the acquiring firm learns about the target firm then the better will be the acquisition performance. Specifically, we find support for the hypothesis that thorough evaluation of the strategic and cultural fit positively influences cross border acquisition success. Further, the analysis reveals that detailed evaluation of the target firm's employee and business capability improves acquisition performance. The managerial implications of the findings and directions for future research are also discussed.

Suggested Citation

  • Ahammad, Mohammad Faisal & Glaister, Keith W., 2013. "The pre-acquisition evaluation of target firms and cross border acquisition performance," International Business Review, Elsevier, vol. 22(5), pages 894-904.
    • Handle: RePEc:eee:iburev:v:22:y:2013:i:5:p:894-904
    DOI: 10.1016/j.ibusrev.2013.01.001
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0969593113000024
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.ibusrev.2013.01.001?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. ,, 2001. "Problems And Solutions," Econometric Theory, Cambridge University Press, vol. 17(6), pages 1157-1160, December.
    2. Maurizio Zollo & Harbir Singh, 2004. "Deliberate learning in corporate acquisitions: post‐acquisition strategies and integration capability in U.S. bank mergers," Strategic Management Journal, Wiley Blackwell, vol. 25(13), pages 1233-1256, December.
    3. Duncan, Catriona & Mtar, Monia, 2006. "Determinants of International Acquisition Success:: Lessons from FirstGroup in North America," European Management Journal, Elsevier, vol. 24(6), pages 396-410, December.
    4. Bertrand, Olivier & Zuniga, Pluvia, 2006. "R&D and M&A: Are cross-border M&A different? An investigation on OECD countries," International Journal of Industrial Organization, Elsevier, vol. 24(2), pages 401-423, March.
    5. Angwin, Duncan, 2001. "Mergers and acquisitions across European borders: National perspectives on preacquisition due diligence and the use of professional advisers," Journal of World Business, Elsevier, vol. 36(1), pages 32-57, April.
    6. Cartwright, Sue & Cooper, Cary L., 1992. "Mergers and Acquisitions," Elsevier Monographs, Elsevier, edition 1, number 9780750601443.
    7. Hema A. Krishnan & Alex Miller & William Q. Judge, 1997. "Diversification and top management team complementarity: is performance improved by merging similar or dissimilar teams?," Strategic Management Journal, Wiley Blackwell, vol. 18(5), pages 361-374, May.
    8. ,, 2001. "Problems And Solutions," Econometric Theory, Cambridge University Press, vol. 17(5), pages 1025-1031, October.
    9. Angwin, Duncan & Savill, Brett, 1997. "Strategic perspectives on European cross-border acquisitions: A view from top European executives," European Management Journal, Elsevier, vol. 15(4), pages 423-435, August.
    10. Shimizu, Katsuhiko & Hitt, Michael A. & Vaidyanath, Deepa & Pisano, Vincenzo, 2004. "Theoretical foundations of cross-border mergers and acquisitions: A review of current research and recommendations for the future," Journal of International Management, Elsevier, vol. 10(3), pages 307-353.
    11. Harzing, Anne-Wil, 1997. "Response rates in international mail surveys: Results of a 22-country study," International Business Review, Elsevier, vol. 6(6), pages 641-665, December.
    12. James G. March, 1991. "Exploration and Exploitation in Organizational Learning," Organization Science, INFORMS, vol. 2(1), pages 71-87, February.
    13. Hitt, Michael A. & Harrison, Jeffrey S. & Ireland, R. Duane, 2001. "Mergers and Acquisitions: A Guide to Creating Value for Stakeholders," OUP Catalogue, Oxford University Press, number 9780195112856.
    14. Graham, John R. & Harvey, Campbell R., 2001. "The theory and practice of corporate finance: evidence from the field," Journal of Financial Economics, Elsevier, vol. 60(2-3), pages 187-243, May.
    15. Yaakov Weber & Oded Shenkar & Adi Raveh, 1996. "National and Corporate Cultural Fit in Mergers/Acquisitions: An Exploratory Study," Management Science, INFORMS, vol. 42(8), pages 1215-1227, August.
    16. Very, Philippe & Schweiger, David M., 2001. "The acquisition process as a learning process: Evidence from a study of critical problems and solutions in domestic and cross-border deals," Journal of World Business, Elsevier, vol. 36(1), pages 11-31, April.
    17. Schuler, Randall & Jackson, Susan, 2001. "HR issues and activities in mergers and acquisitions," European Management Journal, Elsevier, vol. 19(3), pages 239-253, June.
    18. Gayle L. DeLong, 2003. "Does Long-Term Performance of Mergers Match Market Expectations? Evidence from the US Banking Industry," Financial Management, Financial Management Association, vol. 32(2), Summer.
    19. Michael Lubatkin, 1987. "Merger strategies and stockholder value," Strategic Management Journal, Wiley Blackwell, vol. 8(1), pages 39-53, January.
    20. Taco H Reus & Bruce T Lamont, 2009. "The double-edged sword of cultural distance in international acquisitions," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 40(8), pages 1298-1316, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Reynolds (née Schnurr), Noelia-Sarah & Teerikangas, Satu, 2016. "The international experience in domestic mergers – Are purely domestic M&A a myth?," International Business Review, Elsevier, vol. 25(1), pages 42-50.
    2. Reddy, Kotapati Srinivasa, 2015. "Revisiting and Reinforcing the Farmers Fox Theory: A Study (Test) of Three Cases in Cross-border Inbound Acquisitions," MPRA Paper 63561, University Library of Munich, Germany, revised 2015.
    3. Alen Sacek, 2015. "The Scope Of Due Diligence In Cross-Border Acquisitions In Central And Eastern Europe," European Journal of Business and Economics, Central Bohemia University, vol. 10(1), pages 5741:10-574, June.
    4. Loloah Mohammad Alselem, 2021. "The Impact of Acquisitions on the Financial Performance of Companies in the Gulf States," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 13(9), pages 103-103, August.
    5. Wang, Daojuan & Hain, Daniel S. & Larimo, Jorma & Dao, Li T., 2020. "Cultural differences and synergy realization in cross-border acquisitions," International Business Review, Elsevier, vol. 29(3).
    6. Wang, Yi & Larimo, Jorma, 2020. "Survival of full versus partial acquisitions: The moderating role of firm’s internationalization experience, cultural distance, and host country context characteristics," International Business Review, Elsevier, vol. 29(1).
    7. Magnier-Watanabe, Rémy & Lemaire, Jean-Paul, 2018. "Inbound foreign direct investment in Japan: A typology," International Business Review, Elsevier, vol. 27(2), pages 431-442.
    8. Reddy, Kotapati Srinivasa, 2015. "Determinants of Cross-border Mergers and Acquisitions: A Comprehensive Review and Future Direction," MPRA Paper 63969, University Library of Munich, Germany, revised 2015.
    9. Zaiyang Xie & Runhui Lin & Jie Mi & Na Li, 2019. "Improving Enterprises’ Cross-Border M&A Sustainability in the Globalization Age—Research on Acquisition and Application of the Foreign Experience," Sustainability, MDPI, vol. 11(11), pages 1-19, June.
    10. Valentina Cioli & Alessandro Giannozzi & Valentina Ippoliti & Oliviero Roggi, 2021. "Cross-Border M&A and Financial Performance: Empirical Evidence on Bidder/Target Companies," International Journal of Business and Management, Canadian Center of Science and Education, vol. 15(4), pages 1-67, July.
    11. Zhang, Zhu & Lyles, Marjorie A. & Wu, Changqi, 2020. "The stock market performance of exploration-oriented and exploitation-oriented cross-border mergers and acquisitions: Evidence from emerging market enterprises," International Business Review, Elsevier, vol. 29(4).
    12. Hussain, Tanveer & Shams, Syed, 2022. "Pre-deal differences in corporate social responsibility and acquisition performance," International Review of Financial Analysis, Elsevier, vol. 81(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ahammad, Mohammad Faisal & Tarba, Shlomo Y. & Liu, Yipeng & Glaister, Keith W. & Cooper, Cary L., 2016. "Exploring the factors influencing the negotiation process in cross-border M&A," International Business Review, Elsevier, vol. 25(2), pages 445-457.
    2. Durand, Muriel, 2016. "Employing critical incident technique as one way to display the hidden aspects of post-merger integration," International Business Review, Elsevier, vol. 25(1), pages 87-102.
    3. Reddy, Kotapati Srinivasa, 2015. "Determinants of Cross-border Mergers and Acquisitions: A Comprehensive Review and Future Direction," MPRA Paper 63969, University Library of Munich, Germany, revised 2015.
    4. Ahammad, Mohammad Faisal & Tarba, Shlomo Yedidia & Liu, Yipeng & Glaister, Keith W., 2016. "Knowledge transfer and cross-border acquisition performance: The impact of cultural distance and employee retention," International Business Review, Elsevier, vol. 25(1), pages 66-75.
    5. Wang, Daojuan & Hain, Daniel S. & Larimo, Jorma & Dao, Li T., 2020. "Cultural differences and synergy realization in cross-border acquisitions," International Business Review, Elsevier, vol. 29(3).
    6. Reddy, Kotapati Srinivasa, 2015. "Extant Reviews on Entry-mode/Internationalization, Mergers & Acquisitions, and Diversification: Understanding Theories and Establishing Interdisciplinary Research," MPRA Paper 63744, University Library of Munich, Germany, revised 2015.
    7. Shimizu, Katsuhiko & Hitt, Michael A. & Vaidyanath, Deepa & Pisano, Vincenzo, 2004. "Theoretical foundations of cross-border mergers and acquisitions: A review of current research and recommendations for the future," Journal of International Management, Elsevier, vol. 10(3), pages 307-353.
    8. Alen Sacek, 2015. "The Scope Of Due Diligence In Cross-Border Acquisitions In Central And Eastern Europe," European Journal of Business and Economics, Central Bohemia University, vol. 10(1), pages 5741:10-574, June.
    9. Kedia, Ben L. & Reddy, Rama Krishna, 2016. "Language and cross-border acquisitions: An exploratory study," International Business Review, Elsevier, vol. 25(6), pages 1321-1332.
    10. Reddy, Kotapati Srinivasa, 2015. "The State of Case Study Research in Mergers & Acquisitions: A Review of the Literature in Different Management Streams," MPRA Paper 63939, University Library of Munich, Germany, revised 2015.
    11. Bauer, Florian & Matzler, Kurt & Wolf, Stefan, 2016. "M&A and innovation: The role of integration and cultural differences—A central European targets perspective," International Business Review, Elsevier, vol. 25(1), pages 76-86.
    12. Popli, Manish & Akbar, Mohammad & Kumar, Vikas & Gaur, Ajai, 2016. "Reconceptualizing cultural distance: The role of cultural experience reserve in cross-border acquisitions," Journal of World Business, Elsevier, vol. 51(3), pages 404-412.
    13. Strobl, Andreas & Bauer, Florian & Matzler, Kurt, 2020. "The impact of industry-wide and target market environmental hostility on entrepreneurial leadership in mergers and acquisitions," Journal of World Business, Elsevier, vol. 55(2).
    14. Arup Barua & Alexandra Ioanid, 2020. "Country Brand Equity: The Decision Making of Corporate Brand Architecture in Cross-Border Mergers and Acquisitions," Sustainability, MDPI, vol. 12(18), pages 1-24, September.
    15. Ilaria Galavotti & Daniele Cerrato & Franca Cantoni, 2020. "Surviving after Cross-Border Acquisitions: How Business Relatedness, Host Country Experience, and Cultural Distance Affect Acquired Firms," Sustainability, MDPI, vol. 12(17), pages 1-18, August.
    16. Slangen, Arjen H.L., 2006. "National cultural distance and initial foreign acquisition performance: The moderating effect of integration," Journal of World Business, Elsevier, vol. 41(2), pages 161-170, June.
    17. Rao-Nicholson, Rekha & Salaber, Julie & Cao, Tuan Hiep, 2016. "Long-term performance of mergers and acquisitions in ASEAN countries," Research in International Business and Finance, Elsevier, vol. 36(C), pages 373-387.
    18. Abhirup Chakrabarti & Will Mitchell, 2016. "The role of geographic distance in completing related acquisitions: Evidence from U.S. chemical manufacturers," Strategic Management Journal, Wiley Blackwell, vol. 37(4), pages 673-694, April.
    19. Bok Baik & Kwanghee Cho & Wooseok Choi & Jun-Koo Kang, 2015. "The Role of Institutional Environments in Cross-Border Mergers: A Perspective from Bidders’ Earnings Management Behavior," Management International Review, Springer, vol. 55(5), pages 615-646, October.
    20. Pierre-Xavier Meschi & Emmanuel Métais, 2007. "Expérience, oubli organisationnel et motifs de désinvestissement des acquisitions internationales:le cas des acquisitions françaises aux États-Unis (1988-2004)," Revue Finance Contrôle Stratégie, revues.org, vol. 10(4), pages 73-109, December.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:iburev:v:22:y:2013:i:5:p:894-904. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/133/description#description .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.