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In conversation: Four keys to merger integration success

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Eight basic beliefs about capturing value in a merger

Organizational culture in mergers: Addressing the unseen forces

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Divesting with agility

Through a different lens: A McKinsey perspective on separations

Active portfolio management: Interview with Andy West

Going, going, gone: A quicker way to divest assets

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Practice makes perfect: What sets programmatic acquirers apart

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A Better Approach to Mergers and Acquisitions

Far more mergers succeed today than in the past. Here’s how to post a win.

Twenty years ago, consultants at Bain & Company published a book that explored a dispiriting reality: Although companies spent billions of dollars a year pursuing deals, 70% of mergers and acquisitions wound up as failures.

But today those odds have inverted. According to new research by Bain, over the past 20 years firms have done more than 660,000 acquisitions, worth a total of $56 trillion, with deals reaching a peak in 2021. And close to 70% of them have succeeded. Even among the roughly 30% that were less successful, many of the deals still created some value.

What has changed? This article presents four explanations for the turnabout.

Twenty years ago, consultants at Bain & Company published a book that explored a dispiriting reality: Although companies spent billions of dollars a year pursuing deals, 70% of mergers and acquisitions wound up as failures. The book, Mastering the Merger , was released in the wake of a series of corporate marriages that ended badly, including AOL and Time Warner, Daimler and Chrysler, and Citicorp and Travelers. This wasn’t a new phenomenon. Academic studies dating back to the 1970s had concluded that most acquisitions don’t play out the way the investment bankers promise. Even among deals that appeared profitable from investors’ perspective, Bain’s surveys of executives showed that many fell short of the internal projections made to justify the purchase.

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Acquisition →

• 20 Jun 2023
• Cold Call Podcast

Elon Musk’s Twitter Takeover: Lessons in Strategic Change

In late October 2022, Elon Musk officially took Twitter private and became the company’s majority shareholder, finally ending a months-long acquisition saga. He appointed himself CEO and brought in his own team to clean house. Musk needed to take decisive steps to succeed against the major opposition to his leadership from both inside and outside the company. Twitter employees circulated an open letter protesting expected layoffs, advertising agencies advised their clients to pause spending on Twitter, and EU officials considered a broader Twitter ban. What short-term actions should Musk take to stabilize the situation, and how should he approach long-term strategy to turn around Twitter? Harvard Business School assistant professor Andy Wu and co-author Goran Calic, associate professor at McMaster University’s DeGroote School of Business, discuss Twitter as a microcosm for the future of media and information in their case, “Twitter Turnaround and Elon Musk.”

• 29 Nov 2022
• Research & Ideas

Is There a Method to Musk’s Madness on Twitter?

Elon Musk's brash management style has upended the social media platform, but was bold action necessary to address serious problems? Andy Wu discusses the tech entrepreneur's takeover of Twitter.

• 13 Dec 2021

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Mergers shake up the status quo at companies and help women and people of color move up the ladder. Research by Letian Zhang mines data from 37,000 deals. Open for comment; 0 Comments.

• 14 Jan 2021
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With heated debate over antitrust regulation of online platforms, this study finds that when a larger platform acquired its greatest competitor, users were not better off with a single platform compared with two competitors, despite marked efficiency improvements experienced by the acquiring platform.

• 30 Nov 2020

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• 05 Nov 2019

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• 04 Jun 2019

Political Influence and Merger Antitrust Reviews

This paper uses a large sample of United States mergers between 1998 and 2010 to study how political connections help firms obtain favorable antitrust regulatory outcomes for mergers. Given that antitrust regulators are subject to congressional oversight, the authors predict and find evidence that outcomes systematically favor firms that are constituents of politicians serving on judiciary committees.

• 30 May 2019

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• 10 Apr 2019

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• 14 May 2018

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• 12 Feb 2018

Private Equity, Jobs, and Productivity: Reply to Ayash and Rastad

In 2014, the authors published an influential analysis of private equity buyouts in the American Economic Review. Recently, economists Brian Ayash and Mahdi Rastad have challenged the accuracy of those findings. This new paper responds point by point to their critique, contending that it reflects a misunderstanding of the data and methodology behind the original study.

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• 15 Dec 2008

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• 28 Nov 2005

Unilever: Transformation and Tradition

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• 02 Apr 2001

Not All M&As Are Alike—and That Matters

In this Harvard Business Review article, Professor Joseph L. Bower shares some of the results of his year-long study of M&A activity sponsored by HBS. Discover how five distinct merger and acquisition strategies scenarios play out—and his recommendations for success. Closed for comment; 0 Comments.

Articles on Mergers and acquisitions

Displaying 1 - 20 of 58 articles.

Australia’s biggest chemist is merging with a giant wholesaler. Could we soon be paying more?

Angel Zhong , RMIT University

Are bigger super funds better? Actually no, despite what the industry is doing

Geoff Warren , Australian National University

Why post-Brexit Britain is still open for business – despite what Microsoft says

Tolu Olarewaju , Keele University

Elon Musk’s Twitter takeover isn’t quite a done deal: what happens now

Mark Humphery-Jenner , UNSW Sydney

Do poison pills work? A finance expert explains the anti-takeover tool that Twitter hopes will keep Elon Musk at bay

Tuugi Chuluun , Loyola University Maryland

Unilever: why the maker of Marmite is feeling the squeeze

John Colley , Warwick Business School, University of Warwick

Biden wants to crack down on bank mergers – here’s why that could help consumers and the economy

Jeremy Kress , University of Michigan

The zombie company problem and what it means for our economies – podcast

Gemma Ware , The Conversation and Daniel Merino, The Conversation

Takeovers: a tidal wave of buyouts is coming in 2021 – here’s what it means

Karl Schmedders , International Institute for Management Development (IMD) and Patrick Reinmoeller , International Institute for Management Development (IMD)

How the T-Mobile -Sprint merger will increase inequality

Amitrajeet A. Batabyal , Rochester Institute of Technology

How daylight saving time can mess with financial markets

Antonios Siganos , University of Glasgow

Are mergers harming consumers? We won’t know if we don’t check

Caron Beaton-Wells , The University of Melbourne

Sainsbury’ s-Asda merger: failed big bet has serious strategic consequences

Duncan Angwin , Lancaster University

Why PepsiCo is splashing out US$3.2 billion on SodaStream

Shlomo Ben-Hur , International Institute for Management Development (IMD) and Brian Bolton , International Institute for Management Development (IMD)

What impacts do takeover defences have on shareholders?

Simon Segal , Macquarie University

What is a ‘poison pill’?

Yannick Thams , Suffolk University

Why Comcast and Disney’s bidding war for Sky has reached astronomical heights

AT& T-Time Warner, net neutrality and how to make sense of the media merger frenzy

Amanda Lotz , University of Michigan

Sainsbury’s and Asda merger: it’s all about market share

Naaguesh Appadu , City, University of London

With its purchase of Whole Foods, is Amazon’s goal to revolutionise food distribution?

Isabelle Chaboud , Grenoble École de Management (GEM)

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East-Meets-West: Mergers and Acquisitions challenges and opportunities in and out of Asia

• Perspective
• Published: 15 October 2022
• Volume 21 , pages 715–744, ( 2022 )

Cite this article

• Yipeng Liu 1 , 2 ,
• Ralf Bebenroth 3 &
• Yi Yang 4  

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Mergers and Acquisitions (M&As) have long been a strategically important corporate strategy for growth and global expansion. Research on M&As in Asian contexts is linked to the relevant countries’ phenomenal business growth, economic transformation, and institutional development. To consolidate and synthesise the existing body of knowledge related to the ‘East-Meets-West’ notion, this paper will present an examination of the characteristics of M&As both in and out of Asia from an international perspective, with a geographical focus on China, Japan, and South Korea. We investigated the influencing factors related to the distinctiveness and commonalities of M&As in and out of Asia. Our findings suggest that the divergence in Asian M&As may be driven by industrial characteristics and national environments, while their convergence may be due to human aspects. Our study contributes to the divergence and convergence debate in the context of in and out of Asia M&As in relation to the East-Meets-West concept.

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Introduction

As an important and commonly pursued corporate strategy for non-organic growth and international expansion, Mergers and Acquisitions (M&As) enacted in Asian contexts have been the object of the continuous attention of scholars (Bebenroth & Hemmert, 2015 ; Froese et al., 2008 ; Zhang et al., 2020 ), practitioners policymakers (Meyer, 2016 ). The growing interest in Asian M&As echoes the rapid economic growth, business development, and institutional transformation occurring in Asian countries. Contrary to the trend that envisages the de-globalization and decoupling of the global business landscape (Witt et al., 2021 ) in the post COVID-19 pandemic recovery phase (Liu et al., 2020 ), we suggest that Asian countries will continue to play an important role in shaping international business communities (Froese et al., 2019 ; Redding & Witt, 2006 ). We argue that a nuanced and contextualized understanding of the characteristics and trends of Asian M&As may provide some revealing insights suited to comprehend and predict the new global business reality. Our study was thus aimed at consolidating and synthesizing our extant understanding of Asian M&As by focussing on three Asian countries—namely, China, Japan, and South Korea (hereafter Korea).

The pressure to internationalize is a substantial factor for Asian firms in the race towards globalization. On one hand, Asian firms tend to adapt to internationally accepted (Western) norms (Froese et al., 2020 ), with the evidence showing, for instance, that the Japanese government encourages the country’s publicly listed firms to enact Western-style corporate governance reforms (Kato et al., 2017 ). This observation is aligned with the convergence argument found in international business and management research. On the other hand and as postulated by the divergence argument, global management practices need to be considered in local contexts. Specifically, it could be argued that the acquisition behaviours of Asian firms differ from those of their Western counterparts. Therefore, our study was aimed at answering the following question: ‘What influencing factors underpin the characteristics of M&As both in and out of Asia?’.

In the literature, there is a consensus that any reforms need to be viewed as reflecting each Asian country’s uniqueness and that their adoption may occur at a rate slower than that observed in their Western counterparts (Clarke et a 2019 ). Also, M&As—as a research topic traditionally examined in Western contexts, with the main scholarly contributions coming from the US and Europe (Bruner, 2002 ; Weber et al., 2014 )—are increasingly picking up speed in Asia. Instances of M&As increase as Asian firms align their strategies to those found in the West. Broadly speaking, we may characterize Asian M&As as belonging to one of three categories, depending on their direction. First, domestic M&As, which occur within geographical boundaries and have emerged as a common business practice in Asia over time (Peng, 2012 ). Second, inbound M&As, which are largely driven by multinational enterprises entering the booming Asian markets (Meyer et al., 2009 )—e.g. the still infrequent but increasing instances of inbound M&As observed in Japan and Korea (Bebenroth & Hemmert, 2015 ). Third, outbound M&As, which are initiated as a globalizing strategy by Asian companies, especially Chinese firms and rising emerging market multinationals (Grosse & Meyer, 2019 ). These Asian ‘latecomers’ are swiftly learning to improve their performance by studying and adopting Western management practices in relation to M&As. A visible example of this phenomenon is the Chinese takeover of Volvo (Yakob et al., 2018 ), wherein each Swedish manager was paired with a Chinese counterpart for learning purposes. This arrangement, coupled with a strong motivation to learn, may facilitate the reverse transfer of knowledge from the target to the acquirer (Liu & Meyer, 2020 ).

Industry characteristics, which reflect both the economic structure and business landscape, influence the frequency and volume of domestic and international M&As. Furthermore, national environments can have a strong bearing on the characteristics of the M&As taking place in Asia, especially in relation to dynamic institutional development and enduring business systems. Therefore, the business characteristics of firms, industries, and national environments can affect M&A activities. Based on a discussion of the unique characteristics and development of domestic, inbound, and outbound M&A transactions, our aim was thus to provide a contextualized and nuanced understanding of Asian M&As.

Based on a review of the existing research and on an analysis of M&A data sourced both in and out of Asia, we attempted to identify some general commonalities and distinctive characteristics of Asian M&As at the domestic, inbound, and outbound levels. Our findings suggest that industrial characteristics and national environments may shape the divergence of Asian M&As, while human aspects (Sarala et al., 2019 ) may influence their convergence. Below, we discuss the M&As taking place in China, Japan, and Korea. We conclude this paper by discussing the factors that may contribute to the convergence and divergence debate and outlining the challenges and opportunities pertaining to Asian-centred M&A research.

Industry characteristics and national environments and their impact on Asian M&As

Industry characteristics, which reflect the economic structure and business landscape, influence the frequency and volume of domestic and international M&As. Furthermore, national environments can have a strong bearing on the characteristics of the M&As taking place in Asia, especially in relation to dynamic institutional development and enduring business systems. This section describes the business characteristics of firms, industry characteristics, and national environments and their impact on M&As initiated in China, Korea, and Japan. Based on the discussion of their unique patterns and on recent developments in domestic, inbound, and outbound M&A transactions, we provide some illustrative comparisons highlighting the divergence found in Asian M&As.

The case of China

Since the launch of the ‘Reform and Opening’ policy, in 1979, the Chinese economy has undergone significant and rapid development. During this period, business activities and management practices have been significantly shaped by the modernization of state-owned enterprises (SOEs) (Redding & Witt, 2006 ) and by the rise of private entrepreneurship amid the endorsement of a market economy with Chinese characteristics (Huang, 2008 ; Nee, 1992 ). The economic landscape and industry characteristics directly affect every aspect of the business activity, including M&As both in and out of China (Cooke, 2006 ; Liu & Meyer, 2020 ). Conventionally, the Chinese landscape has been mainly dominated by the traditional manufacturing industry sectors—such as textile and machinery—while the service industry has emerged by taking dramatic strides and making increasingly significant contributions to the economy. Relatedly, servitization can be achieved and orchestrated by Chinese manufacturing firms through collaborative partnerships (Liu et al., 2019 ), especially by means of outbound M&As (Xing et al., 2017 ). China’s Five-Year Plan—a national-level policy guidance that embeds institutional endurance and novelty—is attuned to the new policy environment and global contexts in shaping and influencing China’s development. In 2021, China’s 14th Five-Year Plan involved the identification of several strategic areas—such as environmental protection, new energy, healthcare, and the net-zero economy—highlighting the urgency to tackle economic and societal challenges. Recent Chinese M&A activities reflect this national policy direction.

Domestic Chinese M&As

In China, M&As emerged relatively late compared to other, more developed Asian and global economies. One key factor in this respect were the national environment and regulatory frameworks, which did not encourage M&A activities in the early phases of the developing Chinese market economy. Therefore, for a long time, joint venture alignments dominated collaborations and partnerships established among Chinese companies and their foreign counterparts (Collinson & Liu, 2019 ). Importantly, the institutional transformation and regulatory changes enacted in China significantly affected corporate activities and organizational behaviours. For instance, when the establishment of wholly owned foreign subsidiaries was allowed in China, there was a strong trend to convert joint ventures into this newly legitimated form (Puck et al., 2009 ). Furthermore, continuous changes and transformations shaped the development of domestic business activities and of the Chinese economy in general.

With regards to Chinese domestic M&As, they have evolved dynamically with the broader business environment and management practices. For instance, the modernization of SOEs can be realized through M&As by partnering with privately owned firms in order to enhance operational efficiency while accommodating the socio-cultural advantages stemming from state ownership (Xing & Liu, 2016 ). Furthermore, the recent rapid development of the digital economy in China has produced several digital giants such as BAT (Baidu, Alibaba, and Tencent). These big technological companies have become important players in acquiring and absorbing relatively smaller and entrepreneurial ventures (Graebner et al., 2010 ). This notwithstanding, given the trust asymmetry prevailing in them, M&As pursued by large companies to acquire entrepreneurial technological ventures necessitate both buyers and sellers to build trust-based relationships (Graebner, 2009 ). Therefore, it is not uncommon to observe Chinese digital giants building their own ecosystems (Nambisan et al., 2019 ) through M&As via portfolio companies—both upstream and downstream—to orchestrate resources, leverage capabilities, and anticipate synergies.

The COVID-19 global health crisis has dramatically affected Asian business and management practices (Liu et al., 2020 ). The macro-level global business context, in combination with the Chinese national environment, can significantly shape the M&As initiated both in China and globally. For instance, in 2020, 33 M&As involving values of over US$1 billion and 368 with a scale of over US$100 million were completed. The largest transaction involved the acquisition of Sinopec assets by National Pipeline Network, with a transaction value of US$6.918 billion. Among China’s Top 10 completed domestic M&As, FAW Car's acquisition of FAW Jiefang and China Shipbuilding's acquisition of Jiangnan Shipbuilding were initiated by SOEs. This also reflects the important role played by SOEs in the current economic dual circulation strategy in China. In Table 1 , we list the top 10 domestic M&As completed in China in 2020.

Inbound M&As into China

The Chinese environment presents foreign companies with both challenges and opportunities in regard to operating and navigating through the national institutional complexity (Froese et al., 2019 ). Thus, foreign M&A activity in China and other emerging economies involves constant changes mirroring the development of the national environment and institutional conditions (Meyer et al., 2009 ; Peng, 2012 ). This macro-level environment requires foreign companies to be adaptive, flexible, and sensitive to the regulatory frameworks and institutional environment. For example, the entry mode choice for foreign hospitals in the Chinese healthcare market has evolved in parallel with the regulatory environment (Xing et al., 2020 ). Nevertheless, despite the relaxation of regulations, which have gone from prohibiting wholly owned foreign subsidiaries to legitimating standalone their business operations, foreign hospitals, for instance, still prefer to engage in collaborative partnerships to tap into the knowledge, expertise, and networks of local Chinese partners. In a similar vein, the success or failure of inbound M&As into China largely relies on the appropriate choice of target (Cooke, 2006 ).

From a longitudinal perspective, the structure of inbound cross-border investments changes over time. With China’s implementation and its facilitation of investment policies, the investment environment has significantly improved, the forms and structure of foreign investment in China are constantly changing, and the number and value of inbound M&As have increased significantly. The black line in Fig.  1 shows the 2006–2020 inbound M&As into China.

Inbound M&As  to China, Japan and Korea

Hong Kong is the main destination of inbound M&As into China, while Singapore is the country’s second largest source of such transactions. Increasingly, Switzerland, Korea, the United States, Germany, France, and the United Kingdom have become important sources of inbound M&As into China. Investment companies established by multinational companies in China are also an important source of inbound M&As.

Outbound M&As from China

China only began to be a source of outbound M&As in early 2000s, as a result of the national ‘China Going Global’ policy. Compared with its inbound counterpart, China’s outbound Foreign Direct Investment (FDI) is still in its infancy, despite its fast-moving development and its increasing influence on the global business landscape. The extant research has analysed this relatively new, yet important topic at the institutional, organizational, and individual levels. At the institutional level, it largely has focussed on the motives and intentions underpinning Chinese cross-border M&As, such as the institutional escape perspective (Witt & Lewin, 2007 ), and the role played by the government (Luo et al., 2010 ). At the organizational level, it has focussed on entry mode choices (Cui & Jiang, 2009 ), post-M&A integration (Liu & Woywode, 2013 ), organizational control and delegation (Wang et al., 2014 ), and knowledge management (Zhang et al., 2020 ). At the individual level, it has investigated leadership, emotional responses, and HRM (Liu & Meyer, 2020 ).

In addition to the knowledge accumulated on the rising Chinese globalization phenomenon, the pertinent literature stream on emerging market multinational enterprises (EMNEs) (Luo & Zhang, 2016 ) is both timely and important to understand M&As targeted to and originating in Asia. Emerging economies are associated with unique multi-dimensional characteristics that can shape and influence international business and management practices (Meyer & Peng, 2016 ). Thus, the role played by context deserves careful consideration in understanding emerging economies and designing international management practices (Hitt et al., 2005 ; Liu & Vrontis, 2017 ). For instance, Chinese outbound M&As present a unique ‘light-touch integration’ approach in the post-M&A phase, highlighting the important influence of culture and organizational learning capability (Liu & Woywode, 2013 ). Furthermore, the management of brand in Chinese outbound M&As is a challenging task that requires a holistic approach incorporating national-, organizational-, and product-level factors (Liu et al., 2018 ). Chinese outbound M&As can provide learning opportunities for reverse knowledge transfer (Liu & Meyer, 2020 ) and knowledge diffusion (Li et al., 2019 ). Importantly, both the adaptive learning (Luo, 2020 ) and springboard perspectives (Luo & Tung, 2018 ) may accelerate the learning process and outcomes for Chinese companies and for EMNEs in general.

The black line in Fig.  2 shows Chinese outbound M&As completed between 2006 and 2020. Following an initial rapid increase, there has been a sharp drop since 2017 due to Western countries pushing back. Recent developments show that the total value of outbound Chinese M&As announced in 2020 was US$46.41 billion, a year-on-year decrease of 46.2%. Consistently, the number of announced outbound M&As for 2020 was 53, a year-on-year decrease of 18.5%. In the fourth quarter of 2020, the announced outbound M&As initiated by Chinese companies rebounded sharply, with their value increasing by 122% over the third quarter 2018 . This rebound signals the recovery of the Chinese economy after the COVID-19 pandemic. In Table 2 , we list the top 10 Chinese outbound M&As for 2020.

Outbound M&As from China, Japan and Korea

Furthermore, from the transaction value perspective, North America and Asia are the most popular overseas M&A destinations for Chinese companies, each accounting for 30% of the total investment amount. Except for Africa, all other continents have continued to exhibit a decline. Chinese companies have invested in Germany, Italy, Saudi Arabia, and Korea, resulting in outbound M&As to grow against the trend. The number of outbound M&As announced by Chinese companies towards Asian destinations in 2020 accounted for 40% of the total, a 4.3% increase year-on-year. Asia is the only continent in which the number of transactions has already reached pre-COVID-19 pandemic levels. Table 3 lists the key characteristics of Chinese overseas M&As towards different geographical regions.

Notably, the regional trade structure has played an increasingly important role for M&As originating in China and Asia. Robust economic interaction and lowered trade barriers have been seen in the Asia–Pacific region following the signing of the Regional Comprehensive Economic Partnership (RCEP). New free trade partnerships have been established between China and Japan and between Japan and Korea. Under the RCEP, consistent place of origin standards will be adopted in the region, providing enterprises with greater flexibility and convenience. This will enhance the integration of the regional supply chain and encourage further intra-region investments among the RCEP’s signatories and FDI from other geographic regions. In addition, the negotiations for the Comprehensive Agreement on Investment (CAI) between China and Europe are on schedule. Such agreement will pave the way for more investment among Chinese and EU businesses. Under the CAI, a set of consistent investment rules are expected to be implemented by the 27 EU members in order to lower trade barriers and enhance the business environment. The higher level of market openings between China and the EU will benefit Chinese investors looking for outbound opportunities.

The case of Japan

Strong and powerful Japanese multinationals have been recognized by the West as ‘Corporate Japan’ since the late 1980s (Yoshimori, 1995 ). Around that time, Japanese firms outperformed Western ones in exports, especially competing successfully against US firms and triggering a strong fear of Japanese MNCs in the US. An example of this is Matsushita Denki, an electronics firm from Osaka that renamed itself as Panasonic. This successful economic period ended with the so called Japanese bubble of the late 1980s, during which non-performing loans became a serious issue for the Japanese economy. In brief, many Japanese firms became unable to pay back their loans, and banks were unable to provide sufficient capital to firms, resulting in a ‘lost decade’ in business history (Tsuruta, 1999 ).

The Japanese economy is currently still the third largest in the world, and a strong economy is always underlined by firm-specific characteristics. One major characteristic of Japanese industrial firms is their membership of business groups, called Keiretsu, wherein they support each other (Hoshi & Kashyap 2004 ). Historically, such keiretsu consist of Mitsubishi, Mitsui, Sumitomo, Fuyo, Sanwa, and Daiichi Kangyo. Besides such business groups, which heavily affect M&A, the concept of the Japanese company unions should also be briefly mentioned. In contrast to the strong trade unions found in the West, their Japanese counterparts are weak in their defence of workers’ rights, with union representatives often sharing offices with top managers (Tachibanaki & Noda, 2000 ). Finally, in recent years, it has become popular for many Japanese firms to employ high numbers of temporary workers called ‘haken’, who bring two advantages to Japanese firms (Gottfried, 2018 ). First, they are employed on short term contracts (often yearly ones that involve lower pay packages and no bonuses). This affords Japanese firms the flexibility to cut costs if necessary in times of hardship. Second, and more important to this research, it enables Japanese firms to save money, and thus to invest in other firms.

Domestic Japanese M&As

Since the mid-1990s, domestic M&As have become the dominant form for Japanese firms to enter new markets (Metwalli & Tang, 2005 ), with the year 2019 even recording a peak of around 3000 domestic deals, compared to only 1000 cross-border (inbound and outbound) ones. Put different, three out of four Japanese M&As are currently domestic ones (Fig.  3 and 4 , MARR, 2021 , p. 14). However, in spite of their high proportion, most domestic deals are small in value and often result in consolidating targets.

Source: MARR, 2021 , p. 14

Japanese Domestic M&As.

Japanese Outbound M&As. Data source: MAAR Recof Data, 2021, p. 14

The global economic impact caused by the COVID-19 pandemic has also affected Japanese firms. A recent survey conducted by Ernst and Young on a sample of Japanese top managers showed that 74% of the respondents had already taken steps to change their supply chains and transform their digital workforce. Interestingly, 57% of Japanese managers also confirmed they would actively pursue M&As over the following 12–24 months (EY, 2021).

Turning to the real numbers at hand, high numbers of Japanese domestic M&As have continued to be completed in 2020 and 2021, with firms selling and buying predominantly non-core assets. The Japanese M&A market was not much affected by the COVID-19 pandemic. In 2020, there was a mere 8.8% decline, to a total of 3730 transactions. Domestic M&As still registered 2944 deals, merely down 1.5% from the previous year. In the near future, a rebound to pre-COVID M&A levels is expected (Dwyer et al., 2021 ); looking at the first nine months of 2021, 2794 deals had already been registered.

It is also worth noting that the total M&A value for 2020 ended up being even higher than that for 2019 because some deals involved high value transactions. For example, the Japanese SoftBank Group sold their shares in Nvidia to the British chip company Arm for about US$40 billion. Also, Nippon Paint merged its activities with Singapore`s Wuthelam in order to expand its business into the latter’s non-core sectors (Dwyer et al., 2021 ). Looking at the trend of domestic M&As over the last 35 years, it is clear that a boom was experienced between 1997 and 2011 and a new one started in 2011 and is still ongoing.

Besides being numerous, domestic M&A deals also have unique characteristics. Kaneko et al. ( 2020 ) found that the post-acquisition performance of companies that are members of keiretsu is not as good as that of their independent counterparts. While, for the latter, target restructuring that involves reducing employee numbers is common, keiretsu acquirers tend to do the opposite. Keiretsu acquisitions thus seem to be aimed more at rescuing struggling targets than at enhancing economic performance. Consequently, the stock prices of keiretsu acquirers react less positively to M&A announcements than those of independent firms (Kaneko et al., 2020 ).

Inbound M&As into Japan

Historically, inbound M&As into Japan have been infrequent and have never accounted for more than 300 deals a year (with the only exception of 2007, with 307 deals). Also, some of such investments involved previously affiliated firms based in Japan—e.g. the US firm Invesco’s recent acquisition of Invesco Japan. The actual number of inbound M&As into Japan is therefore even lower than the official one (Magnier-Watanabe et al., 2018 ). The grey line in Fig.  1 shows the value of inbound M&As into Japan from 2006 to 2020.

Early research indicated that Japanese firms had always been wary of being acquired by foreign companies (Okabe, 2002 ), especially through hostile takeovers (Milhaupt, 2005 ). One reason for this was (and still is) a concern that acquisitions by foreign firms would change the Japanese work ethos. Furthermore, there were fears of higher post-deal competition, of a loss of job security, and (in the case of Western buyers) of shifts towards more individualistic workplace environments that would negatively affect the existing harmony. Japanese firms had many other reasons to reject any takeover bid, especially by foreign acquirers. Well-known stories of failed attempts by foreign bidders reach as far back as the late 1980s, when US corporate raider T. Boone Pickens attempted to take over the Japanese firm Koito and resell it piecemeal. Any unsellable part of the firm was intended to be restructured or closed down. However, the main shareholder, Toyota, rejected the transfer of shares to Pickens, in a demonstration of what was then labelled the closeness of Japan (Corcoran, 1991 ). Since then, Japanese firms have established a system called ‘cross shareholding’, whereby Japanese firms hold each other’s shares to prevent being taken over by foreign firms. For many years, long-term Japanese shareholders (antei kabunushi) symbolized corporate Japan (Okamoto, 2022 ). Practice-oriented research postulates that amendments to the corporate governance system influence the willingness of Japanese managers to accept foreign share ownership (Hansen et al., 2021 ). Further, strong criticism from the international business community may have brought changes to the Japanese mindset that foreign investment will automatically abate firm value. US investment funds were especially critical of Japanese firms for their rejection of foreign initiatives, with Lawrence ( 1991 ) raising the point of differentiating the openness of products to openness of firms (to be taken over). Nowadays, those funds have a much more positive view of investing in Japan.

Outbound M&As from Japan

In spite of the decrease in the numbers of outbound M&A caused by the COVID-19 pandemic in 2020 (Dwyer et al., 2021 ), takeovers remain an attractive globalization option for Japanese firms. Further, acquisitions of foreign targets represent a way to circumvent the fierce domestic competition by entering foreign markets (Shimizu & Uchida, 2018 ; Stern & James, 2016 ). Both Japan and Korea are experiencing not only ageing societies but saturated home markets. This is understandably leading to an increasing interest in outbound M&As. Thus, over the years, Japanese MNCs have become experienced in conducting such deals, especially towards the USA (Bebenroth & Ahmed, 2021 ), with research indicating that investment behaviours differ in regard to the target countries (Bebenroth & Hemmert, 2015 ; Pak & Park, 2005 ).

Japanese companies have recognized outbound M&As as important and effective tools for global growth. However, it has been reported that some Japanese top managers still select their targets by following naïve instincts, rather than objective evidence. For example, some Japanese top managers invest in foreign companies to which they feel ‘mentally close’, or with which they already have established connections. Etzo and Takaoka ( 2018 ) showed that even foreigners working at Japanese headquarters can influence top managers to invest in their own home countries (Etzo & Takaoka, 2018 ).

The differences between Japan’s outbound and domestic M&As are both quantitative and qualitative. First, the value of outbound deals is, on average, higher than that of domestic ones. For example, in 2018, Takeda paid about US$68 billion for Irish pharmaceutical firm Shire. In 2020, 7-Eleven took over the US supermarket sector firm Speedway for about US$20 billion. Second, Japanese bidders pay significantly higher premiums for cross-border targets than for domestic ones; about 50% over the current share price, on average (Bebenroth & Ahmed, 2021 ). Third, rational premium-payment behaviours are evident in domestic deals, but not in outbound ones. When Japanese domestic acquirers are laden with debt, they pay lower premiums for their targets. In contrast, in the case of cross-border acquisitions, Japanese acquirers will not pay lower premiums even when faced with high levels of debt, which signals irrational investment behaviours (Bebenroth & Ahmed, 2021 ).

Also, Japanese firms strive for openness. Several Japanese firms have publicly demonstrated their financial capability and their willingness to take over foreign firms. For example, Asahi Breweries and Mitsubishi Chemical publicly announced their interest in taking over foreign targets (Shimizu & Uchida, 2018 ). The same authors evidenced that Japanese firms act in this fashion not only to comply with recent Japanese corporate governance guidelines, but also to share their goals with their investors in an effort to reduce any information asymmetries (Shimizu & Uchida, 2018 ).

Looking at the numbers of outbound M&As, it is evident that Japanese bidders have been actively taking over foreign firms since the late 1980s. During the so called Japanese bubble, Japanese firms had the financial resources and the (sometimes overestimating) attitude to take over foreign firms. For example, in the year 1990, 463 outbound acquisitions were reported, predominantly towards the US. Once the economic bubble had burst, Japanese firms reduced their investments abroad. From 2009 onwards, however, an increase in outbound acquisitions can once more be observed. Outbound M&As went up from 299 in 2009 to 826 in 2019 (before the COVID-19 outbreak), the highest number ever (MARR, 2021 ). Throughout the COVID-19 pandemic, outbound acquisitions declined to 557 transactions in 2020 (MARR, 2021 ), but went up again to 411 in the first nine months of 2021. Knowing that most deals are closed at the end of the year, a rebound in the numbers of Japanese outbound M&As is expected. The grey line in Fig.  2 shows the evolution of Japan’s outbound M&A deal value from 2006 to 2020.

Considering the top 10 M&As completed in 2020, three worth over US$10 billion each stand out, all of which were outbound. Further, in respect to industry sectors, electronics, finance, and real estate were the dominant ones (Table 4 ).

The case of South Korea

As the 10th largest economy in the world, Korea has been deeply involved in globalization. With its stable consumer market growth, a stable annual GDP growth rate of around 3%, the 5th largest retail e-commerce market in the world (eMarketer, 2020), a highly skilled workforce (Froese et al., 2020 ), and a well-developed soft and hard infrastructure, the Korean market is attractive for global firms. Specifically, the development of the country’s digital and artificial intelligence (AI) technology infrastructure further enhances its advantages. For instance, Korea’s information and communication technologies (ICT) infrastructure has been ranked No.1 in the world (WEF, 2020); also, Korea started commercializing 5G networks in 2019, with 1.9 billion subscriptions expected by 2024 (KOTRA, 2020).

Korean firms have pioneered innovation in some value-adding manufacturing and high technology industries, such as displays, semiconductors, biotechnology, ICT, and beauty (Yang & Pak, 2019). Specifically, the country’s development of its ICT infrastructure, its nationwide 5G service coverage, and its digital ecosystem will also trigger the development of new industries and cross-sector integration. In July 2020, the government proposed the Korean New Deal, which is focussed on Green and Digital New Deals, to drive the further growth of clean energy and digital industries. Changes in strategic directions and the development of new digital environments have become the driving forces behind Korean MNEs’ domestic and outbound M&A activities.

Domestic M&As in Korea

Domestic M&As by Korean companies have increased by 385%, from 84 in 2006 to 408 in 2019 (White & Case, mergers.whitecase.com). The acquisition value has also risen, reaching a peak of US$77.8 billion in 2015 and then falling to US$50.19 billion in 2016. Since 2017, the annual deal value has been relatively stable around US$40 billion. The value of domestic M&As decreased in 2020 due to the COVID-19 pandemic. However, both the transaction numbers and value are anticipated to reach a new peak in 2021. The top four industry sectors with the most frequent transactions are: (i) industrials and chemicals, (ii) financial services, (iii) technology, media, and telecom (TMT), and (iv) consumer products.

Korean business groups mainly initiate domestic M&As for reasons of strategic organizational restructuring aimed at further strengthening their core competitiveness. They sell non-core assets in order to stabilize investments in core businesses. Some business groups have even sold profitable assets to secure liquidity for strategic acquisitions. For example, SK Construction sold all the shares it owned in its wholly owned subsidiary SK TNS in 2020. SK TNS specialized in communication network projects, with average annual sales and operating profits respectively of about 650 billion won (about US$480 million) and 41.1 billion won (about US$41 million) during the past three years. Its income was relatively stable, as 98% of it came from SK affiliated businesses (Deloitte, 2020). Nevertheless, SK construction sold it in order to acquire new green industry projects from EMC holdings.

During the COVID-19 pandemic, some industries faced great setbacks and were forced to engage in organizational restructuring. For instance, the airline industry had to reduce or even pause its operations to comply with governmental restrictions. Both of the country’s two leading airline companies—Korea Air and Asiana Air—had to sell part of their assets in 2020. Also, the Doosan Group prepared a 3 trillion won (about US$2.25 billion) self-rescue plan by selling some of its subsidiaries and real estate assets. For instance, Doosan Solus, which produced copper foil for the batteries of electric vehicles, was sold to Skylack in order to alleviate its parent group’s financial burden (Deloitte, 2020). Table 5 lists the top ten domestic M&As completed in Korea in 2020.

Inbound M&As into Korea

During last 15 years, the Korean government has worked on creating a friendly business environment suited to attract foreign investment in order to increase the national firms’ competitive capacity in value-adding manufacturing and R&D and lead to higher levels of innovation. Korean inbound M&A value has shown a steady growth during the past 15 years, with a peak of US$18.83 billion recorded for 2014 (as shown by the dotted line in Fig.  1 ). According to a data analysis performed by Mergermarket, we can see the convergence and divergence in the top acquirers regions and their target industries. Most Korean inbound M&As come from the US, with a total transaction value of US$29.62 billion. Firms from Japan and China, Korea’s close neighbours, are the second and third top acquirers, having completed inbound M&As for total values of respectively US$10.81 and 9.71 billion With the exception of China and Hong Kong, all top ten inbound acquirers are OECD countries.

In terms of target industries, inbound M&As usually target Korean firms in the TMT sector, for a total value of US$32.29 billion. Given that Korea is home to the most developed ICT infrastructure and to some of the most competitive IT firms, this is not surprising. In addition to the TMT sector, the top inbound M&A target industries of recent years include chemicals, financial services, and consumer products. Table 6 lists the top ten inbound M&As completed in Korea in 2020. Four of the main target companies are internet based, covering banking (KakaoBank Corp), payments (Kakaopay Corp), gaming (DoubleDown Interactive Co Ltd), and retail (Kurly Inc). In addition, US and Canadian bidders were also interested in industries such as water and waste management.

Outbound M&As from Korea

Over the past 15 years, Korea’s outbound M&A transactions have shown an upward trend in both numbers and value. The numbers have remained high since 2016, with a peak of 90 transactions recorded in 2018. Although the COVID-19 pandemic disrupted the global economy, the acquisition of overseas assets by Korean companies was not interrupted. Although the annual transaction value for 2019 recorded a slight 6.12% drop, it rebounded by 20.18% in 2020. As the dotted line in Fig.  2 shows, total transactions have since surpassed their pre-pandemic level, recording their highest value since 2006 (US$17.51 billion).

According to Mergermarket data, the targets of Korean outbound M&As are concentrated in the US, with a total investment value of US$62.16 billion from 2006 to 2020. This is more than five times that of Korean outbound M&A investment in Japan, which is listed as the second largest target country, with a total of US$11.63 billion over the same period. This is followed by China, with a total investment of US$11.2 billion. Emerging countries such as Vietnam and Indonesia, which have undergone rapid industrialization, are also top target countries of Korean outbound M&As.

The industry sector distribution of Korean outbound M&As mainly involves: (i) chemicals (US$44.51 billion), (ii) energy, mining and utilities (US$35.86 billion), and (iii) TMT (US$29.04 billion). Also, Korean firms tend to acquire high-tech industries in Western developed countries, but market resources in developing ones. For instance, in 2020, SK Hynix announced the highest deal (US$9 billion) for the acquisition of Intel’s US NAND memory and storage business in order to enhance its leadership and competitiveness in the global semiconductor industry (SK Hynix, 2020). The SK Group also paid US$300 million to acquire shares of Chinese based firm Chindata Group Holding Ltd, specializing in hyper-scale data centres located in China, Malaysia, and India (The Korea Economic Daily, 2020). In addition, the SK Group acquired 16.3% shares of Vietnam’s top retailer Vincommerce, tapping into the fast-growing e-commerce market in emerging Asian countries (The Korea Economic Daily, 2021).

The top 20 transactions completed from 2019 to 2021 (SDC database provided by Thomson Reuters) show that Korean firms have actively been looking for global growth opportunities despite the COVID-19 pandemic. In other words, Korean firms seem to be preparing for the recovery of the global market. The top 20 outbound M&As show increases in (i) green industry, including clean materials and clean energy related deals (five cases), (ii) e-commerce, including online cultural content and finance services (seven cases), and (iii) autonomous vehicle and semiconductor high-tech industries (five cases). These three major trends are consistent with the world economy’s transition towards net zero, decarbonization, and digitalization. They are also in line with the Green and the Digital New Deal guidelines newly proposed by the Korean government. Korean companies acquire complementary resources on a global scale, carry out strategic restructuring through outbound M&As, and enhance their global competitiveness.

In terms of target regions, ten instances involve North American firms, four European ones, and six Asian ones. On the one hand, Korean firms are actively expanding into overseas markets (e.g. Asian and North American ones) to prepare for the global post-pandemic economic recovery. On the other hand, Korean firms are strengthening their leading industry sectors—such as semiconductors and autonomous vehicles—by acquiring strategic assets and new technologies (e.g. in Europe and North America). Korean firms are committed to exploring new fields, such as clean materials and clean energy, to remain resilient and prepare for the challenges and opportunities heralded by future environmental changes.

Table 7 lists the top ten outbound M&As completed in 2020, and also reflects the main target countries and industries. The top ten deals involve, among others, semiconductors, infrastructure (including highways in Portugal and financial platforms in Cambodia), new energy vehicles, IT (big data), and pharmaceuticals.

Discussion: challenges and opportunities for M&As in and out of Asia

The role of asian m&as in the global cross-border m&a market.

To better understand the role played by Asian countries in the global cross-border M&A market, we summed up their shares in Figs.  5 (inbound M&As) and 6 (outbound M&A). These show a relative stable increase of North-Asian (Chinese, Japanese, and Korean) inbound M&As and fluctuations of outbound ones over the years.

Global Inbound M&As to China, Japan and Korea in percent

For North-Asian inbound M&As, Fig.  5 shows a relatively sustained increase over time, as they accounted for around 2.5% of the global total in 2006, and had risen to 6% in 2020. Even though the average global share of North-Asian inbound M&As over the past 15 years is only 4.9%, it has recorded an overall slow and stable growth. We also noticed that North-Asian inbound M&As remained relatively stable even in the wake of the 2008 global financial crisis and of the COVID-19 pandemic. It is noteworthy that they hit their peak of 7.84% in 2009, and remained at 6.01% in 2020. Asian countries have attracted relatively more M&As after crises, which also implies global MNE confidence in the stably growing North-Asian market.

Conversely, the tendency of North-Asian outbound M&As (Fig.  6 ) shows greater variation over the years. It accounted for approximately 6.5% of the global total in 2006 and exceeded 23% in 2016. This decreased to 18.85% in 2018—before COVID-19—and dropped further to 7.67% in 2020, after the crisis. On average, it accounted for 12.86% of total global outbound M&A transactions. North-Asian outbound M&As are more vulnerable to environmental changes, such as the pertinent governmental regulations and policies enacted in both the home and host countries, geopolitical tensions, external crises, etc.

Global Outbound M&As from China, Japan and Korea in percent

Considering that the cumulative GDP of our three focus countries accounted for 16% of the global total in 2006, and for around 25% in 2020—with an average of about 20%–M&As in and out of Asia did not account for a high proportion of the global total. However, Asian cross-border M&As are expected to play a more active role in the global economic recovery and to drive a new round of global resource integration and coordination.

From a quantitative perspective, the firms of all our three focus nations are actively involved in M&As. Domestic acquisitions have frequently recorded high numbers of transactions, suggesting a dynamic M&A activity. Larger Japanese and Korean conglomerates are often split up, with domestic firms providing rescue missions for the acquired employees. Chinese firms’ domestic acquisitions are driven by the large market potential. However, while the outbound activities observed in Japan and Korea have been steadily increasing in recent years, the Chinese ones have been subjected to a ‘push back’ by Western governments since 2017, indicating a more complex geopolitical environment for international business in general and overseas M&As in particular. From a qualitative perspective, Japanese and Korean firms are clearly positioned to succeed in their cross-border M&As in environmental technology and digitalization. By comparison, Chinese firms still have an attractive home market, which entices foreign investors. Alongside the collaborative work conducted with foreign firms at home, Chinese firms’ overseas M&As are encountering greater challenges stemming from geopolitical complexity, even though such firms’ willingness and ability to pursue outbound M&As have significantly improved over time. In terms of the ‘human aspect’, we observed a plethora of similarities among our three investigated countries. This notwithstanding, with their ‘light-touch approach’, they all face difficulties in regard to integrating their foreign targets into their business strategies.

The convergence vs. divergence debate

Our study traced the development trend of M&As in and out of Asia by using the examples of China, Japan, and Korea. Apart from our macro-level observations, we argue that, to understand such M&As, it is important to pay attention to the human factor. The convergence vs. divergence debate has long been a feature of international business and management studies (Xing et al., 2016 ). For instance, the notion of the liability of Asianness is important in examining the global talent management practices enacted in Chinese, Korean and Japanese MNEs (Froese et al., 2020 ). Our analysis subscribes to this approach by highlighting the commonalities and distinctiveness of M&As in and out of Asia.

Several factors may lead to the divergence of M&A activities in Asia. First, the dynamics of regional trade structures and global geopolitical tensions (e.g. Indo-Pacific dynamics) give rise to additional challenges for businesses to engage with regional and international partners. Second, the global supply chain will take a new shape due to the COVID-19 pandemic. Business organizations may thus turn to M&As as an attractive strategy suited to compensate for the overreliance of the global supply chain on Asian production. Third, national strategies and economic environments will guide domestic and international M&A activities. As for China, global economic loose coupling and China’s economic dual-circulation strategy, alongside the 14th Five-Year Plan, may boost both the numbers and value of M&As in certain sectors and regions.

However, the ‘human aspects of M&As’ in Asia show characteristics of convergence between our three focus countries. Sarala et al. ( 2019 ) argued for a more fine-grained understanding of the ‘human aspects of M&As’ to contribute to the micro-foundation movement in management studies (Felin et al., 2015 ), and to collaborative partnerships in particular ( 2021a ; Liu et al., 2017 ). We argue that human aspects represent widely shared characteristics among Asian firms in their pursuit of M&As in and out of Asia. The commonalities resonate with convergence, highlighting the underlying behavioural antecedents. For instance, Asian firms tend to focus on the long term, valuing stable relationships over short term profits. With this long-term view, the expectations of Asian acquirers may not pay off because of the shrinking time horizon that characterizes today’s dynamic, disruptive, and uncertain world. The integration of Western targets turns out to be especially more difficult than expected, with integration issues regularly becoming a challenge when ‘East meets West’ due to differences in cultural mindsets. Western target managers ask for clear rules or straight orders, while Asians (underpinned by Confucian, Buddhist, or Shinto belief systems) may just passively wait and trust the other party.

Communication difficulties and misunderstandings caused by a lack of communication perceived by the Western party remain a challenge for Asian investors in Western firms (Bebenroth, 2020 ). Bebenroth and Bartnik ( 2018 ) investigated the challenges faced by a Japanese steelmaking firm that had taken over a German engineering firm specializing in waste disposal. The authors showed that one of the biggest uncertainties experienced by the German target’s managers had turned out to be being left alone, alienated, wondering what their Japanese acquirer wanted them to do and about the reasons underpinning the takeover. Chinese companies also tend to adopt a ‘light-touch integration’ approach that involves giving high degrees of autonomy to the targets of their outbound M&As (Liu & Woywode, 2013 ). Intuitively, a light-touch integration presents challenges for the acquirer in relation to absorbing knowledge from the target. By contrast, human aspects can contribute significantly to post integration management, with important performance implications. For instance, in Chinese outbound M&As, boundary spanners can facilitate the reverse transfer of knowledge with the support of team-based HRM practices (Liu & Meyer, 2020 ). Furthermore, the possession of a bi-cultural identity can affect talent the recruitment and retention practices enacted in cross-border M&As (Liu et al., 2021b ).

Thus, the human aspects of integration are considered important, especially in the Asian context (Froese, 2020 ; Jiang et al., 2012). Also, empirical studies contend that Korean target employees welcome any changes made to their organizational culture, and appreciate any variation brought by Western acquirers (Froese et al., 2008 ; Pak et al., 2015). In order to successfully achieve integration, it is also important to convey a sense of participation to Korean employees and establish management trust in the process (Pak et al., 2015; Yang & Pak, 2019). Therefore, when ‘East meets West’, the main challenge involves getting employees to overcome any perceived uncertainty linked to the anticipated organizational and cultural restructuring that accompanies post cross-border M&A integration.

The Asia vs. the West perspective

A comparative perspective between Asia (or the East) and the West can be conducive to a nuanced and contextualized understanding of M&As in and out of Asia and of their implications for wider business and economic activities. There is early evidence that the devastating economic impact of the COVID-19 pandemic has affected Asian countries less than their Western counterparts, the US most of all (Feyisa, 2020). Almost all Western countries completely locked down their economies for longer during the COVID-19 pandemic. In Asia, despite the more recent lockdowns enforced in China, the pandemic did not affect Asian businesses as seriously as it did Western ones. In Japan, for example, the ‘state of emergency’ meant that restaurants were temporarily not allowed to sell alcoholic drinks, but everything else went on as usual. Business hours were shortened, but not to the extent of a full lockdown, with all the negative consequences suffered by businesses in the West. Also, Asian firms merely asked their employees to work from home whenever possible. In contrast, in Europe many firms made working from home compulsory, with employees being forced to do so even if they had no understanding of it. The various collaborative partnerships set up in Asian countries between the government and businesses contributed to agility, innovation, and resilience in the fight against COVID-19 (Lee et al., 2021 ; Liu et al., 2020 ). Therefore, despite some lockdowns recently imposed in Shanghai, the economic impact of the COVID-19 pandemic has been less serious in Asian countries. Outbound M&As of Asian countries to the West can therefore be expected to increase in number and in value because, on one hand, many Asian firms set aside a budget to invest in acquiring Western firms and, on the other hand, following the COVID-19 pandemic, Western firms may find themselves in a more serious condition and ask for (Asian) support.

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Liu, Y., Bebenroth, R. & Yang, Y. East-Meets-West: Mergers and Acquisitions challenges and opportunities in and out of Asia. Asian Bus Manage 21 , 715–744 (2022). https://doi.org/10.1057/s41291-022-00201-6

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Cross-Border Mergers and Acquisitions

One of the most consequential events in any firm’s lifetime is a major acquisition. Because of their importance, mergers and acquisitions (M&As) have been an enormous area of research. However, the vast majority of this research and survey papers summarizing this research have focused on domestic deals. Cross-border ones, however, constitute about 30% of the total number and 37% of the total volume of M&As around the world since the early 1990s. We survey the literature on cross-border M&As, focusing on international factors that can lead firms to acquire a firm in another country. Such factors include differences in economic development, laws, institutions, culture, labor rights, protection of intellectual property, taxes, and corporate governance.

We thank Eduard Inozemtsev, Sejin Kang, Daisy Wang, and Grace Zhang for excellent research assistance, Rose Liao for help with computations, and Jeff Netter and René Stulz for helpful suggestions. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.

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Women possess a secret weapon for merger and acquisition success.

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Our pop art super-heroine using her powers in deal-making.

Women’s distinct deal-making talents became evident during a conversation with a male CEO I was interviewing for my M&A book. “You know, a man would never write this kind of book. It would never dawn on a guy to be addressing this emotional stuff. From my experience, it’s how people act or don’t act that dooms the deal. Women’s ability to anticipate and provide guidance on the more personal aspects of a deal is invaluable,” he suggested. Indeed.

As an M&A consultant, focused on the people piece of mergers and acquisitions, I’ve spent countless hours in due diligence and integration meetings. Men tend to be the majority in these meetings, yet women are growing in number and playing bigger roles. According to Datasite’s 2022 study on the changing landscape of M&A, women are a rising force in dealmaking, comprising nearly half of the Millennial and Gen Z workforce employed in mergers and acquisitions. This is a positive shift, as the CEO noted.

Women bring unique insights to dealmaking. Numerous M&A practitioners shared how one casual observation made by a woman on the deal team shifted the focus on something that was being ignored. They witnessed people “open up” to a woman during deal negotiations and share things that they might not normally share. Increasingly, men have acknowledged that without the women on their team, the deal objectives might not have been achieved.

John Sengenberger, director of integrations and separations at Virtas Partners, appreciates the unique skills women bring to deal making, especially when egos can drive discussions. He recalled a female colleague who frequently “elevated” the conversation during deal deliberations. “She would manage to keep the conversation from devolving into an ego-fueled argument between male colleagues and clients, and get the team refocused on the priorities at hand. Her guidance was invaluable and saved us precious time.”

Women have “superpowers” for deal success.

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More women are leveraging their unique skills and intuition in deal-making to improve deal outcomes. “Spreadsheets and documents don’t do deals. People do deals. And people come with all sorts of personal motivation and history which can impact a transaction. Understanding the ‘people part’ is key to successful outcomes,” commented Justine Mannering , a managing director at Stifel, as we discussed the role women play in bringing deals to closure.

Mannering added, “As bankers, our role is to facilitate transactions for our clients and maximize their outcome. That requires closing gaps between buyers and sellers to get to that right outcome. Knowing your client—the person, not the business persona—and understanding their ‘why’, is critical to understanding what they see as success. Emotional intelligence, intuition, and empathy are skills I have leaned in to and found invaluable in helping my clients to close deals.”

These are the five “superpowers” women possess that contribute to deal success:

• Women illuminate the human side of M&A (which tends to be ignored)
• Women the intuition to see things (which may not be obvious to others)
• Women have people open up to them (in ways that are insightful)
• Women simplify the messaging (so more people can understand)
• Women can anticipate future challenges (thanks to intuition on what could go wrong)

In conversations with female dealmakers across the M&A landscape, they shared stories and observations on how leaning in to their superpowers , rather than diminishing them to fit in, have contributed to success in their roles and deals.

1. Women Illuminate The Human Side of M&A

Pre-deal, the focus on completing playbook checklists may lead to neglecting the strain on teams and individuals. In these instances, women’s sensitivity to how people are doing can be invaluable. Rekha Devarapalli, who leads due diligence and integration as M&A senior director, at Camping World, shared when she observed a process which could and should be modified.

“One item on the integration checklist was for IT to change all IT equipment overnight for each RV dealership acquisition. This required IT to work through the night and the next day. Once complete, IT then had to respond to everyone's queries on the opening day. I saw what this process was doing to the team and the subpar experience it was creating for dealership employees. It was not the wa y Camping World wanted to welcome people into the company,” she explained.

Women can make a real impact.

“When I saw what was happening, I started mapping a 3-day timeline with the seller over which we would switch IT equipment and get ready for the opening day according to a plan. This came as a huge relief for the IT team and their productivity improved. It wasn't hard to do this,” Devarapalli added, “but it was just never the focus before.” Seeing the human-side of the process made it a better experience for all.

2. Women Have Intuition To See Things

When Elon Musk started his hostile bid to acquire Twitter, Stacey Fix Conti , head of M&A integration for Twitter at the time, had a feeling the deal team would not get much guidance from Musk’s team. She also anticipated the leadership team would likely not be around to support the company transition if the deal went through. Conti saw three options:

• Do nothing for post-close planning and hope for the best (not ideal for company or employees)
• Conduct standard planning for a public company transition without input from the buyer (i.e., cutover plan, communications plan, etc.)
• Pursue critical planning, while making no decisions or conducting work that couldn’t be undone if the deal fell through (i.e., work to privatize the company)

Her team chose option #3 and an operations team pursued privatization. Conti remarked, “After the post-close termination of over 80% of Twitter employees, the legacy cash payments were game-changing in the retention of employees in critical roles. If I hadn’t listened to that voice—my intuition—the post-close transition could have been even worse for terminated employees, continuing employees, and the company. The lesson for ladies: trust your intuition.”

3. Women Have People Open Up To Them

The “whoa effect” is when useful information is discovered.

In a word, dealmaking is stressful for all involved. Teams are analyzing mounds of data. Multiple players have differing agendas, and timelines always feel compressed. Once the deal is done, expectations for the CEO tasked with achieving the deal value are high. CEO’s can wonder who to turn to when making decisions.

Jennifer O’Brien , an M&A partner at West Monroe, shared how a relationship she’d built with a CEO helped him through a particularly tricky time at his company. “I built a great relationship with the CEO of one of the healthcare portfolio companies for a PE client invested in Life Sciences,” O’Brien revealed. “We had several conversations and through those I was able to help him think through how to position certain decisions to the Board, as well as work through some people issues he was having related to leadership.” Her ability to have the CEO “open up” helped him feel supported during key company milestones and helped O’Brien’s client achieve success with a company in the portfolio.

Abby Roberts , a senior director at Datasite, believes women play a critical role in fostering an environment where people open up and engage. “In corporate development, the deal origination process can make or break a deal long before any papers are signed. But often, deal origination is too secretive, hindering growth,” Roberts shared. “When I was global head of corporate development at Acuris, I believed creating paths for open idea exchange would lead to a better deal pipeline and successful acquisitions. By engaging all levels of employees and taking a collaborative approach to new market and acquisition prospecting, our team not only enriched our origination pipeline, we also made smarter decisions and achieved smoother integrations.”

4. Women Simplify The Messaging

“After years of believing I needed to be more assertive, and unnaturally aggressive in my communication, I realized I was wrong,” shared Claire Feagley , who has been a director of proposal operations working with military. “Much of my career supported the United States Special Operations Command (USSOCOM), where I focused on securing contracts valued at millions, sometimes billions of dollars. Many, if not all, members contributing to these efforts are retired military veterans—men.”

“I often found lack of team cohesiveness, poor communication or ego would impact the team’s ability to craft compelling communications. I chose to ‘lean in’ to my vulnerability, something I initially believed was completely contrary to creating team cohesiveness among men. My vulnerability, transparency and candidness in communication were key to creating team cohesiveness and for my success in this industry.”

5. Women Anticipate Future Challenges

Catherine Cummings , who’s been a chief human resources officer at multiple tech companies preparing to be sold, acknowledged her superpower in listening to what is being said, as well as what is not , to anticipate potential challenges.

Our super heroine is ready for battle.

“Whether it’s picking up on the energy in the room or detecting when someone is holding back, I’ve found my uncanny ability is to ‘hear or see’ unspoken tensions and consider solutions before they become a problem,” Cummings revealed. “In one deal, the team was so focused on the tactics for the separation of ~40% employees, they’d crafted a bare bones communication plan (i.e., email) for the 60% remaining. I knew we would face future challenges if we didn’t make remaining employees feel welcome to the new company and critical to success. The time and energy our team spent to have equally robust communications for remaining employees accelerated the merger’s success and created far less disruption than anticipated.”

Many younger women in M&A shared they’ve been positively influenced by seeing women at various levels playing critical roles in transactions. Mimi Ghosh , who provides financial sponsors coverage at Bank of America, agreed. “When I was rising through the ranks from a mid-level banker to a senior coverage officer, many of the transactions I closed had women at the forefront, either as investors or founders.”

She witnessed how individual’s unique point of view can unlock potential value for a client and ultimately lead to stronger outcomes for all. Ghosh added, “At the core, dealmaking is a relationship business and the strength of that relationship is often the factor that determines who among many talented individuals pitching a company’s business wins the mandate.”

Leaning into these five superpowers can be the key to relationship building and success in M&A. Time for ladies to tap into their superpowers and fly.

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'Heat is on' cross-market hospital merger oversight: researchers

Regulators have largely overlooked merger proposals that involve health systems operating in different markets, but new research shows those that acquired out-of-market hospitals tended to increase prices.

Larger health systems that purchased hospitals at least 50 miles away increased prices by 12.9% after six years relative to a peer group of hospitals not involved in mergers or acquisitions, according to a study published Tuesday in Health Services Research. Hospitals that acquired out-of-market facilities through multiple transactions over an eight-year period hiked prices at an even faster rate of 16.3%, researchers from University of California, Berkeley, University of California College of Law and University of Auckland found.

Related: Proposed merger guidelines may limit cross-market hospital deals   

“The law is pretty far behind the economics in this area. Calling it a ‘cross-market’ merger, by definition, removes the transaction from the scope of the antitrust laws,” said Barak Richman, a law and business administration professor at Duke University who studies antitrust issues and is not affiliated with the study. “We’ll need to redefine what market we’re addressing and why a particular merger increases market power within that market.”

For the study, researchers looked at 2009-2017 commercial claims data across 214 hospitals involved in cross-market mergers.

The deals did not have any impact on mortality and readmission rates for patients who experienced heart failure, heat attacks and pneumonia, according to the study. While it builds on several cross-market hospital merger studies that found both larger and smaller systems involved in those deals were associated with higher prices, the study published Tuesday is the first of its kind to analyze quality outcomes. 

Cross-market hospital mergers include Charlotte, North Carolina-based Advocate Health , which was formed in 2022 when Advocate Aurora Health and Atrium Health combined, as well as Salt Lake City-based Intermountain Health, which merged in 2022 with Broomfield, Colorado-based SCL Health, and Chicago-based CommonSpirit Health , which was created in 2019 after Dignity Health and Catholic Health Initiatives combined.

Those health systems declined to comment on the study, but the American Hospital Association called it “flawed.” The organization questioned the study's methodology and one of its funding sources, Arnold Ventures, a philanthropic organization focused on health policy.

Cross-market mergers helped keep hospitals open, particularly in rural areas, improved quality and lowered costs, Aaron Wesolowski, AHA vice president of research strategy and policy communications, said in a statement.

“The authors state that their principal finding is that cross-market hospital mergers increase prices by more than 12%. Do not believe those numbers. The authors do not actually compare the prices at acquired hospitals before and after the merger,” Wesolowski said in the statement.

As local acute-care markets become more concentrated, health systems have increasingly looked across state lines for merger partners . In doing so, they have often avoided legal challenges from the Federal Trade Commission, which has focused on hospital mergers in overlapping  areas.

The Federal Trade Commission and Justice Department updated their merger guidelines in December. Some of the guidelines mention serial acquirers that have pursued multiple mergers or acquisitions and  bundling the sale of two products to bolster monopolies.

The guidelines could potentially be used to analyze cross-market hospital mergers, but the FTC would need to intervene on a proposal or completed merger, antitrust experts said. Court interpretations may also affect how the guidelines are used, they added.

“Regulatory authorities have been looking at cross-market transactions more closely than they have in years before. They are waiting for a case they can think they can win, I just hope they don’t wait too long,” said Leemore Dafny, a health economist and professor of business administration at Harvard Business School who is not affiliated with the study. Dafny studies cross-market hospital mergers and worked at the Federal Trade Commission. “The heat is on.”

The FTC hasn’t scrutinized cross-market hospital mergers as closely as in-market transactions because patients typically don’t view far-flung hospitals as substitutes, minimizing potential anticompetitive effects, said Daniel Arnold, lead author of the study and a health economist at University of California, Berkeley. But from the perspective of large employers like Walmart, cross-market hospitals may be substitutes, he said.

“If most hospital mergers are going to be [cross-market], this is something antitrust enforcers should think about,” Arnold said. “Our study essentially rules out quality improvements as a reason for price increases.”

As federal antitrust policy shifts, many states are boosting oversight of healthcare transactions. Providers considering mergers or acquisitions are expecting their transactions to take longer to finalize as state attorneys general ask for more information about the deals, M&A advisers said.

A lot of oversight happens at the state level, and studies like this will capture the attention of state regulators, said Cheryl Damberg, senior principal researcher at RAND, a nonprofit research firm.

“This study shows that cross-market hospital mergers have very negative consequences for employers, consumers and those who pay for care. Regulators are going to pay attention to this,” she said. “These sprawling health systems are hard to manage in a consistent way, and the evidence shows [cross-market] mergers are not benefiting consumers from a quality of care standpoint. Instead, consumers are feeling it in the form of higher copayments, insurance premiums and suppressed wages.”

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Global life and health insurance mergers and acquisitions (M&A)

A review of 2023 and an outlook for 2024 and beyond, covering transactions in North America, Europe, Asia, and Latin America

Quick links: North America Europe Asia Latin America

How has the life and health insurance M&A landscape changed?

Stability is often key to activity in insurance mergers and acquisitions—and 2023 was anything but stable. High inflation and interest rates caused economic uncertainty in many regions, while conflict roiled Ukraine and the Middle East and several global life and health insurance markets faced changes to solvency regulations. These pressures combined to slow M&A transactions among life and health insurers in 2023.

But while deal volume continued its downward trend from the 2021 peak, deal value rose, and there remains demand from traditional insurers, asset managers, and private equity firms for life and health insurance business around the world.

See mergers and acquisitions by country, plus more deal data

Each year, Milliman studies global life and health insurance M&A trends. Our analysis reviews data and deals in North America, Europe, and Asia, with a new section this year for Latin America. We present the highlights of our research below. Download the full report for a country-by-country breakdown of deal specifics, key players, and future projections.

Worldwide statistics

Life and health insurance m&a deals were down—but values were up.

Globally, 80 life and health insurance mergers and acquisitions were announced in 2023, down from 131 in 2022. However, total publicly announced deal values rose from US$20.4 billion in 2022 to US$21.5 billion in 2023.*

*Backing data for some deals was updated after the publication of our earlier reports. For a small number of transactions, certain pre-2023 statistics presented here may not exactly match the numbers in previous editions of the paper. See the PDF for full source information.

Deal volume

North America

Total publicly announced transaction value

$12.5 billion

$3.7 billion

$5.0 billion

Latin America

$200 million

Announced transactions by region

Multibillion-dollar transactions lift deal value more than 300%.

North American insurance M&A in 2023 was similar to 2022 levels and appeared to signal the return of more typical activity after the record highs of 2021. Although the number of deals dropped 32%, their value rose 368%, driven by four multibillion-dollar transactions. M&A in the region is dominated by the United States, where continued high interest rates led to the exploration of different reinsurance structures. Potential changes to U.S. and offshore regulatory environments may encourage companies to review deal options, and we may see more transactions through sidecars and other alternative structures. See the full report for details on the largest deals and key players. Download the full report

Top deal-making countries in the region in 2023:

The most insurance M&A deals of any region—but activity continues to decline

Europe had the most insurance M&A transactions last year of any region in our report, but publicly announced deal values were down 71% from 2022, and 2023 activity continued the trend of declining deals in the region. As in 2022, Spain had the most active market, as well as the highest publicly announced deal value in Europe. Rising interest rates across Europe have caused unrealized losses on fixed income investments for some insurers, which has increased lapse risk and mass lapse capital requirements. The expectation of sustained high rates may lead some companies to reconsider disposing of non-core holdings, and many insurers are waiting until economic conditions stabilize before making decisions about the suitability of portfolios. Still, private equity demand for European life and health insurance business is expected to remain high in 2024 and beyond. See the full report for key transactions in the U.K., Italy, Spain and Portugal, France, CEE, Belgium and Luxembourg, Germany, and the Netherlands. Download the full report

Deal values rise as India, China again dominate insurance M&A activity

In 2023, the number of Asia-based life and health insurance transactions decreased 30% from 2022, but total publicly announced deal values rose 152%. India and China were again among the busiest markets, aided by recent regulations facilitating foreign investment. Still, some multinationals sold their stakes in Asian insurers in 2023. As risk-based capital regimes are implemented across the region—increasing balance sheet volatility and capital needs—some firms may need to dispose of life insurance investments going forward. While IFRS 17 has so far not driven M&A activity in Asia, it may spur future transactions as insurers gain understanding of the regulation’s impact on their financials. See the full report for key transactions in China, India, and Southeast Asia. Download the full report

Insurance M&A activity stable and likely to grow

In 2023, Latin America saw a similar number of life and health insurance M&A transactions as in 2022 and 2021. In addition, the region saw a significant number of large insurance distribution agreements between insurers and financial groups, banks, and retailers, a trend that is expected to continue. Life and health business is projected to grow across the region as insurance uptake rises and increased digitization enables insurers to reach a wider customer base. In particular, Chile’s pension system is a recurrent source of M&A activity. Even Argentina, despite continued economic uncertainty, likely will see more foreign investment after recent political changes.    Download the full report

Life and health insurance M&A

Download the PDF to see more specific data on health and life insurance mergers and acquisitions around the world.

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Globally, 80 life and health insurance mergers and acquisitions were announced in 2023, down from 131 in 2022. However, total publicly announced deal values rose from US$20.4 billion in 2022 to US$21.5 billion in 2023.

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What makes engineering R&D space a target for mergers and acquisitions?

Infosys' acquisition of germany-based in-tech is the 15th top deal so far.

Photo: Shutterstock

Q3 preview: Infosys profit seen falling 7% YoY; wage hikes to erode margins

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First Published: Apr 24 2024 | 5:27 PM IST

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