Patent-Right Uncertainty and Mergers and Acquisitions

74 Pages Posted: 24 Oct 2022 Last revised: 2 Dec 2023

See all articles by Logan P. Emery

Logan P. Emery

Rotterdam School of Management, Erasmus University

Michael Woeppel

Indiana University - Kelley School of Business - Department of Finance

Date Written: November 30, 2023

Abstract

We use patent thickets to study how patent-right uncertainty impacts target selection in mergers and acquisitions. This uncertainty can create additional costs that disrupt technological synergies. We find that firms are less likely to be acquired when their patents are in thickets exacerbating these costs. Conversely, firms are more likely to be acquired when their patents create thickets mitigating these costs. When a firm occupies the same thicket as the acquirer, acquisition probability depends on each firm's ability to impose costs on the other. Consistent with patent-right uncertainty disrupting synergies, we find that targets' thickets are associated with post-acquisition profitability.

Keywords: Mergers and acquisitions, patent rights, patent thickets, synergies, uncertainty

JEL Classification: G34, L14, O32 O34

Suggested Citation

Emery, Logan and Woeppel, Michael, Patent-Right Uncertainty and Mergers and Acquisitions (November 30, 2023). Available at SSRN: https://ssrn.com/abstract=4249384 or http://dx.doi.org/10.2139/ssrn.4249384

Logan Emery

Rotterdam School of Management, Erasmus University ( email )

RSM Erasmus University
PO Box 1738
Rotterdam, 3062 PA
Netherlands

Michael Woeppel (Contact Author)

Indiana University - Kelley School of Business - Department of Finance ( email )

1309 E. 10th St.
Bloomington, IN 47405
United States

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