M&As and innovation: Evidence from acquiring private firms

70 Pages Posted: 11 May 2022 Last revised: 12 Dec 2023

See all articles by Siti Farida

Siti Farida

University of Birmingham - Birmingham Business School

Jana P. Fidrmuc

Warwick Business School - Finance Group

Chendi Zhang

University of Exeter Business School

Date Written: March 8, 2023

Abstract

We show that acquisitions of private targets increase the quantity, quality, and value of acquirers' patents post acquisition. Private target acquisitions also increase innovation synergies, numbers of new inventors, and patent collaborations while public target acquisitions do not. The positive effects concentrate on acquirers with better expertise in identifying innovative private targets, in breakthrough technology sectors, and do not relate to targets' existing patenting. The differences in innovation outcomes when acquiring private versus public targets explain away the higher announcement returns for private target acquisitions. We conclude that complementary innovative capabilities are important for value creation in private target acquisitions.

Keywords: M&As, private target acquisitions, public target acquisitions, innovation, patent. JEL Classification: G34, O31, O32, O34

JEL Classification: G34, O31, O32, O34

Suggested Citation

Farida, Siti and Fidrmuc, Jana P. and Zhang, Chendi, M&As and innovation: Evidence from acquiring private firms (March 8, 2023). Available at SSRN: https://ssrn.com/abstract=4101967 or http://dx.doi.org/10.2139/ssrn.4101967

Siti Farida

University of Birmingham - Birmingham Business School ( email )

Edgbaston Park Road
Birmingham, B15 2TY
United Kingdom

Jana P. Fidrmuc

Warwick Business School - Finance Group ( email )

Warwick Business School
Coventry CV4 7AL
United Kingdom

Chendi Zhang (Contact Author)

University of Exeter Business School ( email )

Streatham Court
Xfi Building, Rennes Dr.
Exeter, EX4 4JH
United Kingdom

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