Cross-border acquisitions: the impact on productivity, employment and wage.

In light of increase of global cross-border mergers and acquisitions activities in the last 20 years, the question of whether firms acquired can benefit from foreign take-overs is crucial from a managerial and a policy perspective. In order to shed light on these issues, the present study uses data from Italian Mediobanca Research Department database for the first time, to examine at the firms level the performance differences of all the mid-sized foreign-controlled firms in the manufacturing sector. From 1999 to 2009, 143 Italian medium-sized firms were acquired by foreign groups (data from Mediobanca). This study analyzes the impact of cross-border acquisitions on the performance (labor productivity, employment and wages) of the target firms, compared with purely domestic firms (non-acquired), with two specific research focuses: 1) cherry and lemon picking effect, in order to understand whether prospect foreign investors select acquisition targets having higher performance (cherries) or prefer ones having lower performance (lemons) before the acquisition; 2) geographic distance, in order to understand whether firms acquired by EU multinationals show higher post-acquisition performance than firms acquired by non-EU multinationals. For a more in-depth understanding of our analysis, a further specification is between firms that are acquired by an industrial investor and ones acquired by a financial one (private equity funds). Our findings suggest that the performance of the acquired firms improved. Furthermore, the results show a marked difference with respect to the nature of investors (industrial and financial) and the geographic distance between acquirer and target firm.