Acquisitions and Technology Value Revision

Management Science (Accepted/In Press)

101 Pages Posted: 12 Jun 2019 Last revised: 2 Nov 2022

See all articles by Xiangshang Cai

Xiangshang Cai

University of Liverpool

Amedeo De Cesari

University of Manchester - Alliance Manchester Business School - Finance & Accounting Group

Ning Gao

Manchester Accounting and Finance Group, Alliance Manchester Business School, University of Manchester

Ni Peng

School of Business and Management, Queen Mary University of London

Date Written: September 5, 2019

Abstract

Acquisition announcements coincide with upward value revisions for the target firms’ technology peers, which are not due to economic relations based on product market, supply chain, or geographical location. Such a phenomenon is robust across sub-sample periods, not specific to merger or technology waves, and not related to product-market structure and the unique innovation features of certain technology-intensive industries. Firms experience more dramatic value revisions when they have deeper technology overlaps with their targets, are more dependent on technology, or when a transaction features higher premium or greater technology overlap between the acquirer and target. Our mechanism analysis provides evidence that is primarily consistent with the Acquisition-Probability Hypothesis whereby acquisition announcements elevate expected technology synergies and merger prospects for peers; and partially in line with the Enhanced-Investment Hypothesis that peers’ revaluations correlate with increased technology investments. We do not find any evidence in line with the Competition-Balance Hypothesis which attributes peers’ value revisions to the change in industrial competition intensity. Overall, our results demonstrate that acquisition announcements disseminate novel information about the value of technology that is of common interest among firms with close technologies.

Keywords: technology peer, information transmission, mergers and acquisitions, innovation, valuation

JEL Classification: G14; G32; G34

Suggested Citation

Cai, Xiangshang and De Cesari, Amedeo and Gao, Ning and Peng, Ni, Acquisitions and Technology Value Revision (September 5, 2019). Management Science (Accepted/In Press), Available at SSRN: https://ssrn.com/abstract=3395394 or http://dx.doi.org/10.2139/ssrn.3395394

Xiangshang Cai

University of Liverpool ( email )

Chatham Street
Brownlow Hill
Liverpool, L69 7ZA
United Kingdom

Amedeo De Cesari

University of Manchester - Alliance Manchester Business School - Finance & Accounting Group ( email )

Crawford House
Booth Street East
Manchester, M15 6PB
United Kingdom
+44 (0) 161 2754298 (Phone)

Ning Gao (Contact Author)

Manchester Accounting and Finance Group, Alliance Manchester Business School, University of Manchester ( email )

Booth Street East
.
Manchester, M13 9SS
United Kingdom

HOME PAGE: http://www.research.manchester.ac.uk/portal/Ning.Gao.html

Ni Peng

School of Business and Management, Queen Mary University of London ( email )

Mile End Road
London, London E1 4NS
United Kingdom

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