The Revealed Preferences of High Technology Acquirers: An Analysis of the Characteristics of Their Targets

Cambridge Journal of Economics, Forthcoming

35 Pages Posted: 8 Aug 2005 Last revised: 26 Oct 2014

See all articles by Panos Desyllas

Panos Desyllas

University of Bath School of Management

Alan Hughes

University of Cambridge - Centre for Business Research (CBR)

Date Written: June 1, 2005

Abstract

In this paper we investigate the motives of high-tech acquirers by analysing their revealed preferences in terms of the high-tech companies they acquire. Using a large sample of acquisitions involving publicly traded firms from various countries we ask whether high technology acquisitions are best understood in terms of acquirers seeking to source externally special innovation-related assets by acquiring firms with "superior" innovative performance; or acquirers seeking to acquire firms with "inferior" innovative performance in order to turn them around. We find evidence that acquisition is a very noisy phenomenon and that economic and innovation related variables explain only a modest part of the probability of becoming a target. We do however find that, compared to non-acquired firms, high-tech targets tend to be somewhat larger, to have poorer profitability, lower Tobin's q and liquidity. In relation to their innovative profile, targets, in general, seem to have a relatively larger stock of accumulated knowledge (stock of citation-weighted patents), relatively higher R&D inputs (R&D-intensity), but they are more likely to generate no R&D output (citation-weighted patent-intensity) before they are acquired. We conclude that high technology acquisitions reflect a process which is primarily driven by acquirers wishing to exploit the potential for turning around firms which, despite a good past record, appear to be innovatively and economically inefficient before they are acquired.

Keywords: Mergers and acquisitions, acquisition likelihood, R&D, patents

JEL Classification: G34, O30, L20

Suggested Citation

Desyllas, Panos and Hughes, Alan, The Revealed Preferences of High Technology Acquirers: An Analysis of the Characteristics of Their Targets (June 1, 2005). Cambridge Journal of Economics, Forthcoming. Available at SSRN: https://ssrn.com/abstract=771306

Panos Desyllas (Contact Author)

University of Bath School of Management ( email )

Claverton Down
Bath, BA2 7AY
United Kingdom

HOME PAGE: http://www.desyllas.org

Alan Hughes

University of Cambridge - Centre for Business Research (CBR) ( email )

Top Floor, Judge Business School Building
Trumpington Street
Cambridge, CB2 1AG
United Kingdom
+44 1223 765335 (Phone)

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