Valuing technological synergies in mergers |
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| Institution: | 1. Xiamen National Accounting Institute, Xiamen, Fujian 361005, China;2. Florida State University, Department of Finance, Tallahassee, FL 32306-1110, United States;3. School of Management, Xiamen University, Fujian 361005, China;4. Shenzhen Finance Institute and School of Management and Economics, The Chinese University of Hong Kong, Shenzhen, Guangdong 518172, China;1. School of Business, Chengdu University of Technology, Chengdu 610059, China;2. School of Economics and Statistics, Guangzhou University, Guangzhou 510006, China;1. Shenzhen Central Sub-branch, The People’s Bank of China, Shenzhen, China;2. School of Finance, Nanjing University of Finance and Economics, Nanjing, China;3. Institute of Agricultural Economics and Development, Chinese Academy of Agricultural Sciences, Beijing, China;1. School of Economics and Management, Shanxi University, Taiyuan, China;2. Department of Economics, Pusan National University, Busan, Republic of Korea |
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| Abstract: | Technological synergy in mergers and acquisitions (M&As) is achieved when there is an increase in value generated by combining the stock of complementary technologies of acquirers and targets, as well as utilizing target’s patents to initiate or defend lawsuits against competitors. Using U.S. patent data, we provide quantitative measures of these two sources of technological synergy. We find that these measures of technological synergy are important considerations of acquiring firms and capital market in valuing target firms’ innovative assets, as the measures are positive determinants of merger premium and total synergy gain. The expected total gains of acquirers’ and targets’ shareholders from technological synergy decrease with the difficulties of post-merger integration as proxied by geographical distance between acquirer and target. Our technological synergy measures are also good predictors of post-merger realized synergy, i.e., increase in patent outputs in the overlapped technology classes and market share. |
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| Keywords: | Mergers and acquisitions Technological synergy Merger premium Synergy gain Innovation |
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