Does the Valuation of the Target's Market Matter? Evidence from Cross-Border Acquisitions by U.S. Firms

Most cross-border transactions by U.S. firms occur when the target's market is in a period of high valuation. In this study, I show that timing of cross-border acquisitions by U.S. firms can have a positive impact on announcement returns and on two-year buy-and-hold returns if the acquisition occurs during a period of low market valuation in the target's country. During such periods, abnormal announcement returns and the two-year buy-and-hold abnormal returns are significantly higher than when the acquisition is made during periods of high target market valuation. The implication is that if a short difference in acquisition timing-a month or less-can have a significant impact on the value of the firm, then timing should always be given serious consideration.