The Revealed Preferences of High Technology Acquirers: An Analysis of the Characteristics of their Targets

Panayotis Dessyllas and Alan Hughes
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Panayotis Dessyllas: Said Business School, University of Oxford
Alan Hughes: Centre for Business Research, University of Cambridge
Authors registered in the RePEc Author Service: Panos Desyllas ()

Industrial Organization from EconWPA

Abstract: In this paper we investigate the motives of high-tech acquirers by analysing their revealed preferences in terms of the high-tech companies they acquire. Using a large sample of acquisitions involving publicly traded firms from various countries we ask whether high technology acquisitions are best understood in terms of acquirers seeking to source externally special innovation-related assets by acquiring firms with “superior” innovative performance; or acquirers seeking to acquire firms with “inferior” innovative performance in order to turn them around. We find evidence that acquisition is a very noisy phenomenon and that economic and innovation related variables explain only a modest part of the probability of becoming a target. We do however find that, compared to non-acquired firms, high-tech targets tend to be somewhat larger, to have poorer profitability, lower Tobin’s q and liquidity. In relation to their innovative profile, targets, in general, seem to have a relatively larger stock of accumulated knowledge (stock of citation-weighted patents), relatively higher R&D inputs (R&D-intensity), but they are more likely to generate no R&D output (citation-weighted patent- intensity) before they are acquired. We conclude that high technology acquisitions reflect a process which is primarily driven by acquirers wishing to exploit the potential for turning around firms which, despite a good past record, appear to be innovatively and economically inefficient before they are acquired.

Keywords: Mergers and acquisitions; acquisition likelihood; R&D; patents (search for similar items in EconPapers)
JEL-codes: G34 O30 L20 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-fin and nep-ino
Date: 2005-07-27
Note: Type of Document - pdf; pages: 35
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpio:0507009

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