Cross-border M&A strategy

There is an all-time high appetite for mergers and acquisitions (M&A), especially cross-border M&A, hence deals where the acquiring and the target firm are from different countries. According to the Refinitiv (2022) database, cross-border M&A activities broke records in terms of volume and value in 2021. The 17,849 cross-border M&A deals 2021 were worth more than $2.1tn in 2021. This accounts for 28% of the total M&A deals, and 36% of total M&A value in 2021 and represents an increase of 38% in terms of deal numbers and 69% in terms of deal value respectively compared to 2020.

In line with the economic relevance of M&A activity, research interest in M&A transactions remains unbroken (Hossain, 2021). However, a large body of literature reviews analyzed empirical results about the relationship between M&A and firm performance remain inconclusive, and also the effect of uncertainty on performance is unclear. King, Dalton, Daily, & Covin (2004) called on researching M&A from non-financial motives, such as managing environmental uncertainty. Their research is mostly based on US data and left out international data when testing the data. While previous work mainly studied M&A performance in total (Bamiatzi, Efthyvoulou, & Jabbour, 2017), recent research shifted to focus on cross-border M&A (Campagnolo & Vincenti, 2022).

In this project, we propose a new perspective to discuss the relationship between cross-border M&A and performance. Cross-border M&A has become an important strategy to respond quickly to the fast-changing global economic environment (Caiazza & Volpe, 2015). We propose to look at cross-border M&A from a strategic options perspective and focus on the effect of cross-border M&A on the performance of acquirers operating in dynamic markets.

Firstly, we explore the overarching relationship between cross-border M&A and the performance of acquirers in a dynamic environment, and we study how the deal characteristics affect this relationship. Then we take a programmatic approach to M&A and study how characteristics of portfolios of M&A deals acquirers build affect their performance. Finally, we open the black box of environmental dynamism by decomposing it into its three main components which are the frequency, intensity, and unpredictability of change. We study how the effect on firm performance of deal and portfolio characteristics vary in function of the nature of market dynamism the acquirer faces. In summary, our three studies closely examine the performance of cross-border M&A, specifically in a dynamic environment, and shed light on the deal and portfolio characteristics of acquirer companies in different dimensions of a dynamic environment.

From a managerial perspective, the capability of making acquisitions is crucial for firms to seize the ‘once-in-a-lifetime opportunity’ by making large, hard-to-reverse acquisitions (Shimizu & Hitt, 2004). 

To solve our research questions, we will use data from various databases, including Bureau van Dijk’s Zephyr, Orbis Europe, and the Bloomberg database. The strength of our research from the data perspective is that we have high-quality, cross-validated, and clean data.