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In this chapter, the authors draw insights from the literature on institutional distance and examine whether firms engaging in cross-border acquisitions overcome the liability of foreignness by using external advisors. Specifically, the authors argue that acquiring and target firms may alleviate heightened information asymmetries and transaction costs by leveraging the information-production and uncertainty-reduction roles of M&A advisors. Using a global sample of cross-border M&As from 2001 to 2020, the results suggest that institutional distance triggers both acquirers and targets to use M&A advisors. Among the four types of institutional distance the authors examined, cultural distance – and to a lesser extent administrative distance – greatly contributes to the use of various types of advisors in cross-border deals. Interestingly, although both parties in the transaction rely on advisors to overcome distance barriers, acquiring firms appear to hire advisors more often than target firms.

Cross-border mergers and acquisitions are now the fundamental mechanisms of globalization and considered as prime vehicles for business engagement across the countries through the foreign direct investment route. Significant amounts of foreign funds are crossing the country borders for acquisitions with the objectives of earning super normal returns. But realizing super normal returns from foreign acquisitions are far more difficult than that of foreign greenfield projects or domestic M&As or greenfield projects. The super normal profit itself is “synergy” which is the main driving force for any M&A including the cross-border one. Even though foreign policies of individual countries affect cross-border M&A decisions, corporate and market-driven financial numbers significantly influence the synergy estimation. Synergy should bring in all round greater efficiency and value addition to all stakeholders. But if the cross-border deal is not financially crafted properly, it may fall flat causing more distress to the acquirer compared to domestic acquisition. The theory of synergy is well developed which mostly applies to the domestic M&As. But due to inherent differences between cross-border and domestic M&As, the same synergy theory may not apply equally to the cross-border ones. Therefore, a different connotation of synergy is propounded in this work for cross-border M&As, which can be a corollary to the conventional theory of synergy. This alternative theory of synergy aims at helping the companies in developing their own financial strategies before making their strategic decisions for cross-border M&A deals.

This study uses cross-border mergers as a test of the ability of foreign directors to provide effective strategic advising. We find that firms with foreign directors on their boards are more likely to engage in cross-border mergers, pursue a higher number of cross-border mergers, and invest more in those mergers. We further determine that firms with foreign directors are more likely to undertake nondiversifying mergers, enjoy friendly mergers, and acquire privately held targets. Moreover, we find that firms with foreign directors have higher announcement period returns and pay less for their cross-border targets.

In this chapter, we focus on virtual teams and emotions during postmerger and acquisition (M&A) integration. Our main research question is “How to manage emotions and virtual teams following cross-border M&A?”. We answer this question through the following research subquestions: (1) What virtual interaction can be identified post-M&A?; (2) What emotions arises from virtual communication; and (3) What emotions and challenges do virtual teams encounter following cross-border M&As? This research is based on a single case study. The main findings imply that emotions, trust, and cultural differences play an important role in virtual interaction following a cross-border M&A.

Cross-border M&A has become one of the leading approaches for firms to gain access to global markets. Yet there has been little progress in the research literature exploring the role that culture may play in the success of these ventures. Poor culture-fit has often been cited as one reason why M&A has not produced the outcomes organizations hoped for (Cartwright & Schoenberg, 2006). Cross-border M&A has the added challenges of having to deal with both national and organizational culture differences. In this chapter we review the literature on cultural integration in cross-border M&A and provide a framework designed to help manage the integration process throughout the M&A lifecycle. This framework presents culture assessment and integration as a crucial component to reducing poor culture-fit as a barrier to M&A success.

We question whether the Chinese state has played an effective role in promoting outward foreign direct investment via its “Go Global” policies. Using the literature in International Management as our framing, we observe three inter-related stylized realities. First, it is state-owned enterprises (SOEs) – not private enterprises – that tend to principally benefit from the favorable “Go Global” policies. Second, SOEs tend to pay much higher acquisition premiums in outward FDI as compared to non-SOEs. Third, SOEs tend to be less effective as compared to non-SOEs in gaining synergies and enhancing competitiveness as a result of these cross-border experiences. These results yield clear policy implications for the Chinese government: first, more effective public policy would involve enhanced targeting of private enterprises as the recipients of policies promoting outward FDI; second, the Chinese government should continue along the path toward privatization of SOEs. The continued bolstering of economic and social development in China is contingent upon efforts to reduce the state’s active role in outward FDI.

The globalization of knowledge has driven an increased emphasis on cross-border, high-technology acquisitions where a target firm in a technology industry is acquired by a firm in another nation. However, learning depends on similarity of knowledge, and we find that needed similarity can be provided by either technology or culture. As a result, firms can learn from acquiring targets at increasing cultural distance or at increasing technological distance, but not both. We find an interaction where acquisitions made at longer cultural distances and less technological distance, and acquisitions at shorter cultural distances and greater technological distance improve financial performance. This means technological distance and cultural distance are substitutes or represent a trade-off where improved acquisition performance depends on having commonality (low distance) for one of the variables.

Cross-border acquisitions play an important role in corporate strategic development and international expansion. During the past decades, mergers and acquisitions have been intensively researched through the lenses of strategic management, corporate finance, behavioral finance, etc. Despite the intense effort, the progress made is still fragmented and lacks unifying theories that approach the entire acquisition process on the one hand, and in-depth research of critical factors on the other. The intent of the research paper is to establish a vital link between academic research and practice of mergers and acquisitions, especially regarding the pre-acquisition evaluation.

In detail, the research paper investigates critical factors – and their inclusion in the pre-acquisition due diligence, before decision about acquisition is made. Pre-acquisition due diligence theoretically conforms to organizational learning theory, which proposes the more the acquiring firm learns about the acquisition target, the higher the probability of a successful acquisition. The central hypothesis states that due diligence, including the critical factors, in the pre-acquisition phase is related to acquisition success.

Using a multidimensional measure of critical factors, the empirical evidence is based on 85 cross-border acquisitions that took place between 2007 and 2013 in the European automotive industry. The quantitative analysis finds positive association between the Choice of Strategic Partner, Business Capabilities and HR Knowledge, and Financial Factors and Acquisition Premium as critical factors of due diligence and acquisition success. The strongest relationship is between business capabilities and knowledge transfer as the main asset for realization of synergy values and successful acquisition. In this context, the valuation of the business capabilities of the acquisition targets is classified as the main challenge for reflecting suitability of the acquisition price and establishing value generation from the combined firms in the post-acquisition phase.

By studying acquisition risk and critical factors – both success and failure reasons – this research tested and proved theoretically sound framework for successful acquisition. From a practical standpoint, the research results provide acquisition management with a proven model for pre-evaluating acquisition candidates by means of comprehensive due diligence.

This chapter aims to make sense of the growing research that examines the role of culture in mergers and acquisitions. We provide a detailed review of the many related but distinct constructs that have been introduced to the literature. While each construct has contributed to our understanding of the role of culture, the lack of connections made among constructs has limited the consolidation of contributions. The review shows what these constructs mean for mergers and acquisitions, what major findings have been discovered, and, most importantly, how constructs interrelate. Our discussion provides several opportunities to foster the needed consolidation of this research.

Many announced cross-border mergers and acquisitions (M&As) are never brought to completion despite potential negative consequences to acquirers and targets. This paper presented evidence on the dynamic effects of spatial distance and two industry-level characteristics, namely industry relatedness between the two firms and technological intensity, on the completion likelihood of cross-border M&A deals. Based on a sample of 8,489 M&A transactions we found that the completion likelihood of cross-border M&As increases with spatial distance. The effect is more pronounced for deals across technology-based industries, evidence for related deals is inconclusive.