Inbound M&A to Japan: Cherry Picking Versus Rescue Mission?

This paper investigates differences in targets overtaken by cross-border bidders versus domestic ones. The literature from the selection theory argues that there is "cherry picking." Put simply, cross-border bidders overtake the comparably better performing targets. In contrast, domestic bidders acquire weaker targets what can be termed as "rescue mission." Targets in the study were investigated to see if this statement holds true. The results show that cross-border targets did not perform better but performed worse than domestic ones. According to my sample, I have to conclude that there is no "cherry picking" of cross-border acquisitions. This lends support to the idea that foreign bidders probably come to the acquisition target at a later stage. To put it differently, Japanese firms were being overtaken by foreign bidders in cases where no domestic firm was interested in overtaking the target. Reasons are discussed.