Does Acquisition Lead to the Growth of High-tech Scaleups? Evidence From Europe

Abstract

The post-acquisition growth of high-tech scaleups has received relatively little research attention. This is surprising since buyers are known to target these firms for growth opportunities whilst sellers increasingly seek strategic partners to access resource to scale their ventures. We examine the post-acquisition revenue and employment growth of high-tech scaleups in a multi-country setting, comprising five European economies. Using a propensity-score matching approach and difference-in-differences regression, for a sample of 2187 high-tech scaleups, we demonstrate that acquisition has a positive effect on target firms equivalent to cumulative growth of revenue (employment) of 9-13 (6-10) percent after five (four) years, relative to control firms. We find that nationality matters such that the targets of foreign-owned acquirers exhibit significantly higher cumulative revenue and employment growth than their domestic counterparts. Taking a longer-term perspective, we show that growth dips in the first year, then stabilizes and accelerates in the years following acquisition, indicating a period of adjustment.

Note: This paper was supported by European Union’s Horizon 2020 grant, ISIGrowth GA no. 649186; and the Slovenian Research Agency (research core funding No. P5-0117 and P5-0177).

Keywords: Acquisitions; Cross-border acquisitions; Domestic acquisitions; Firm growth; High-tech scaleups; Propensity-score Matching

JEL Classification: D22, F21, G34, L26