Abstract

Cross border acquisitions were relatively more popular than domestic acquisitions in the UK and many other countries during late 1990s and the beginning of this century (Martynova and Renneboog, 2008, among others).  Apart from attributing it to the wave of globalisation that occurred at the time, hardly any other reason has been given for this phenomenon in the literature. In this paper, we check whether cross border acquisitions were more profitable than domestic acquisitions to bidders, or whether cross border acquisitions made the profitability of bidders to be more persistent than domestic acquisitions, during the period referred to above. Evidence observed from a sample of 199 cross border, and 174 domestic, acquisitions made by firms in the UK during 1996-2003 shows that the cross border acquisitions were significantly less profitable, and that they did not make the profitability of the bidders significantly more persistent, than the domestic acquisitions. These indications are similar to those of the US evidence reported by Moeller and Schlingemann (2005) and raise questions about why cross border acquisitions were relatively more popular than domestic acquisitions during the period referred to above.

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