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

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Author Info
Panayotis Dessyllas (Said Business School, University of Oxford)
Alan Hughes (Centre for Business Research, University of Cambridge)

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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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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
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Handle: RePEc:wpa:wuwpio:0507009

Note: Type of Document - pdf; pages: 35
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Related research
Keywords: Mergers and acquisitions; acquisition likelihood; R&D; patents;

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Find related papers by JEL classification:
G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
O30 - Economic Development, Technological Change, and Growth - - Technological Change - - - General
L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General

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