Muscle Memory of a Target: The Value of a Target’s Subsidiary Experience in Cross-border M&A

Cross-border mergers and acquisitions (M&A) involve complex integration challenges, including dual organizational identification and managing diverse institutional environments. While previous research has focused on country-level factors, the role of target firm characteristics—especially prior subsidiary experience—has been underexplored. This study examines how different target characteristics (subsidiary vs. stand-alone, domestic vs. foreign) affect acquirer shareholder value in cross-border M&As. Using an event study of cross-border M&A deals from 1994 to 2012, we find that subsidiary experience enhances acquirer’s shareholder value. However, as institutional distance increases, the value of domestic subsidiary experience decreases. These findings highlight the importance of subsidiary experience in cross-border M&A and show how institutional distance moderates its effects, offering valuable insights for both researchers and practitioners.