Cherry Picking versus Lemon Grabbing: Target Selection of Cross-Border and Domestic Acquisitions in Japan


This paper investigates whether foreign firms overtake better local targets relative to domestic firms. Building on the geographic proximity and the value creation argument, we make predictions about whether domestic or foreign firms "cherry pick" the targets or "grab lemons". Our findings from a sample of local targets in Japan acquired by domestic and cross domestic acquirers show that both groups cherry-pick local targets, but they evaluate them differently. Targets with a better financial performance are more likely overtaken by domestic acquirers whereas those with a larger employee or market size are more likely overtaken by foreign acquirers.


Cross-border acquisitions, Target selection, Cherry-picking, Geographic proximity, Value creation


Research Institute for Economics and Business Administration
Kobe University
Rokkodai-cho, Nada-ku, Kobe
657-8501 Japan
Phone: +81-78-803-7036
FAX: +81-78-803-7059

Pao-Lien CHEN
Institute of Technology Management
National Tsing Hua University
No. 101, Section 2 Kuang-Fu Road
30013 Hsinchu, Taiwan