M&As and Innovation: Evidence From Acquiring Private Firms
68 Pages Posted: 11 May 2022 Last revised: 12 Dec 2023
Date Written: March 8, 2023
Abstract
We show that acquisitions of private targets increase the quantity, quality, and value of acquirers’ patents post-acquisition. The results are stronger for acquirers with expertise from corporate venture capital, with more experience, in industries with changing product markets, and with products in early life cycle stages. Private target acquisitions also increase innovation synergies while public target acquisitions do not. The differences in innovation outcomes when acquiring private versus public targets explain away the higher announcement returns for private target acquisitions. We conclude that innovation outcomes and synergies are important drivers for the value creation of private target M&As.
Keywords: M&As; private target acquisitions; public target acquisitions; innovation; patent
JEL Classification: G34, O31, O32, O34
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