International Journal of Business and Management; Vol. 15, No. 4; 2020 ISSN 1833-3850 E-ISSN 1833-8119 Published by Canadian Center of Science and Education 67 Cross-Border M&A and Financial Performance: Empirical Evidence on Bidder/Target Companies Valentina Cioli 1 , Alessandro Giannozzi 1 , Valentina Ippoliti 2 & Oliviero Roggi 3 1 School of Management–Business and administration department, University of Florence, Italy 2 University of Florence, Italy 3 University of Florence, Italy; Fundação Dom Cabral, Brazil Correspondence: Alessandro Giannozzi, School of Management–Business and administration department – University of Florence, Italy. E-mail: alessandro.giannozzi@unifi.it Received: January 30, 2020 Accepted: February 20, 2020 Online Published: March 9, 2020 doi:10.5539/ijbm.v15n4p67 URL: https://doi.org/10.5539/ijbm.v15n4p67 Abstract Achieving successful integration of mergers and acquisitions (M&A) continues to pose serious challenges for cross-border acquirers. The aim of this paper was to analyze the impact of cross border M&A on bidder and target companies’ post-M&A profitability, leverage and growth in sales/invested capital. We used a sample of 415 Italian bidder companies and 370 Italian target companies over the period of 2006-2013. Our analysis suggests that the cultural distance exerts positive effects on bidder companies’ post-M&A performance and a negative effect on target companies. Bidder companies better exploit the source of value in terms of competencies and resources, learning from their counterparties. The results suggest that the effect of culture distance is conditioned by the acquirer size, prior experience and managerial capabilities in dealing with cross-border cultural challenges. Profitability ratios show a significant increase in bidder companies, while target companies do not reveal any significant change in the comparison pre-post M&A. Leverage reveals no significant difference in bidder companies, while target companies have a higher leverage after a cross-border M&A. In cross-border M&A, the private equity funds as acquirer do not generate any incremental benefit from the target companies’ post M&A performance. Keywords: mergers & acquisitions, cross-border; financial performance, cultural distance, international management 1. Introduction The M&A market is expanding globally to new countries and new sectors. The economic context is modifying the intensity and direction of cross-border M&As, updating continuously determinants and critical success factors of these operations. Achieving successful integration of mergers and acquisitions continues to pose serious challenges for cross-border bidders and targets. A cross-border merger and acquisition occurs when an operating enterprise acquires control over the whole or a part of the business of another enterprise outside its country. Opportunities offered from this type of operation are related to synergies to create value in terms of the optimization of costs and maximization of profits, keeping companies competitive in a growing global market (Neary, 2007). The main concern is connected to the capacity to succeed in benefiting from these advantages. Because many issues must be considered to evaluate post cross-border M&A performance, the result can differ extensively. The shades taken after an M&A operation are not equal, and thus, theme is still debated presently, and different internal and external factors are studied to have a wide overview. In fact, the statement regarding the increase in growth through acquisition depends on the economic environment and other driving forces that need to be carefully considered. Italian M&A activity has achieved positive results because of a series of phenomena: consolidation of some industrial sectors, business reposition, internationalization, and Italian and foreign private equity interests (Kpmg, 2018). Nevertheless, a series of factors is considered to measure the final impact on different industrial sectors. Kpmg research (2018) has shown that geopolitical uncertainties, such as the first year of the Trump presidency in the United States, the beginning of Brexit and, in the first half of the year, the outcome of the French elections, only partly affected global mergers and acquisitions. Indeed, 2017 was a record year for the number of completed transactions (37,437 deals, up 7% on the previous year), while values slipped slightly (-9%) to nearly $3,000 billion (completed M&As, target). Analysis of the second quarter of 2017