The effects of cross-border acquisitions by Russian companies on their profitability: The comparative analysis of various cases

Abstract

The objective of the given study is to investigate why companies make decisions about cross-border acquisitions that fail to improve their profitability and view this situation in the cases of Russian companies that acquired foreign entities in recent years. The cases selected for the analysis are acquisition of Dr. Scheller Cosmetics by Conrsern Kalina and acquisition of Buhler Industries by Combine Factory Rostselmash The main results of the study are as follows: • The reasons why companies made decisions about acquisition that actually do not increase their profitability are: wrong valuation of potential benefits or costs associated with achieving these benefits, underestimation/overestimation of the relative importance, non-value creating motives, wrong forecasts of the macroeconomic environment. • In cases of the two Russian companies, the highest biases in decision-making process are associated with valuation of costs of an acquisition – integration and launch of joint projects. Due to these biases acquirers didn’t manage to estimate sufficiency of their own resources for achieving goals of the acquisition.