Sources of International M&A Capability: Perspective from Cross-Border M&A Experience of Chinese Multinationals

Chinese multinationals have accumulated a lot of international M&A experience around the world. Does the M&A experience bring a learning effect and what is the mechanism behind the learning effect? Based on Bvd Zephyr global M&A dataset, by using the propensity score matching method and instrumental variable method, this paper confirms that the M&A experience accumulated by enterprises brings a learning effect, and the M&A success rate of enterprises with international M&A experience is 33% higher than that of enterprises without experience. The experience of international M&A attempts but unsuccessful in equity delivery (i.e. failed M&A experience) has little impact on subsequent M&A success rate. The reason why experience can improve the success rate of subsequent M&A is mainly due to the fact that through completing a transaction, an enterprise has mastered the ability to overcome a specific institutional obstacle (e.g. government low efficiency, political instability, etc.). When the target enterprise of the subsequent merger and acquisition is located in a country with similar institutional difficulties, this enterprise has a greater probability of successfully solving the problem or solving the problem faster. Although geographically close countries usually have similar historical origins, cultures, and similar languages, M&A experience from countries in the same region is often intuitively believed to improve the success rate of subsequent M&A. Still, empirical results do not support this argument. The policy suggestion that can be derived is that enterprises should treat their past M&A experience prudently and dialectically. On the one hand, in due diligence, it is necessary to clarify the types and levels of the main institutional risks of the country where the target is located and decide whether to draw on the existing experience based on whether the two are similar. On the other hand, it should be noted that although some countries share geographical borders, historical origins, and even the same language, years of independent development have led to significant heterogeneity in the introduction of foreign investment policies, and the merger experience derived from neighboring countries is likely not applicable to another country.