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

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  • Panayotis Dessyllas

    (Said Business School, University of Oxford)

  • Alan Hughes

    (Centre for Business Research, University of Cambridge)

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.

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Bibliographic Info

Paper provided by EconWPA in its series Industrial Organization with number 0507009.

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Length: 35 pages
Date of creation: 27 Jul 2005
Date of revision:
Handle: RePEc:wpa:wuwpio:0507009

Note: Type of Document - pdf; pages: 35
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Web page: http://128.118.178.162

Related research

Keywords: Mergers and acquisitions; acquisition likelihood; R&D; patents;

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References

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Cited by:
  1. James Foreman-Peck & Tom Nicholls, 2013. "SME takeovers as a contributor to regional productivity gaps," Small Business Economics, Springer, vol. 41(2), pages 359-378, August.

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