Literature Review of Mergers and Acquisitions with the Aim to Obtain Technology and Knowledge
Journal of Corporate Finance Research, Vol. 13, No. 4, pp. 87-94 (2019)
8 Pages Posted: 22 Jul 2020
Date Written: 2019
The rapid digital and technological transformation of the economy is pushing companies to create or improve their technological capabilities. One way to acquire the technology and knowledge that allows companies to maintain competitiveness is through the process of mergers and acquisitions (M&A). The topic of M&A deals which are primarily motivated by the obtaining of new technologies and knowledge is the subject of a large number of studies. The contradictory results in studies of such ‘technological’ M&A transactions can be explained by gaps in the empirical analyses or the weakness of the theoretical knowledge.
The purpose of this study is to review the theoretical works on the effectiveness of technological M&A transactions, and to identify the main trends in this area. In particular, by analysis of the existing academic literature, the motives behind these M&A deals are identified. In order to identify the relevant key determinants of the effectiveness of technological M&A transactions, the motives of traditional M&A transactions were also examined in relation to applicable market and sectoral variables. Further, technological overlaps between the parties to M&A transactions is examined within the empirical studies in this field, and the interrelations between levels of R&D expenditure, innovative activity, and company efficiency are described.
The results of this analysis reveal that technological similarities between acquiring and acquired companies have a positive effect on the reaction of investors and on the effectiveness of an M&A transaction. However, such similarities negatively influence the overall effectiveness of the buyer company. The level of R&D expenses and innovative activity demonstrate inconsistent results with regard to companies’ performance. Other factors that have direct or indirect impacts on the integration between companies were shown to have contradictory results on both parties of a deal.
Based on the existing literature, it is shown that the effectiveness of technological and knowledge-based M&A transactions is associated with uncertainty for investors. This is due to the risks of such transactions in different sectors of the economy, the motives of managers and the characteristics of the parties of the transactions.
The novelty of this paper is represented by its concise presentation of technology’s influence in this specialised area of business and economics. This work consolidates the conclusions of the extant scientific literature in a forthright manner in this increasingly relevant field of study. The data presented herein will be of utility to academics, student, and professionals in the field of M&A deals.
Keywords: mergers and acquisitions, innovation, efficiency of mergers and acquisitions
JEL Classification: G34, O32
Suggested Citation: Suggested Citation