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

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.

► We consider that a thorough evaluation, i.e. due diligence, can make the difference between the success and failure of cross border acquisitions. ► Our findings provide a novel contribution by examining the impact of a thorough evaluation of the target firm on cross border acquisition performance. ► 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.