Recent literature has emphasized several motivations behind mergers and acquisitions (M&As). Firm acquisitions have been shown to serve as a way to gain access to international markets, technological assets, product lines or other valuable resources of the target firm. Little is known, however, about how these different take-over motivations are linked to the size of the transaction. Is the importance of technological assets more pronounced for small acquisition targets? Do firms enter new geographical markets through the acquisition of large players in foreign markets? On the one hand, smaller target firms might have important intellectual property rights which larger firms might be willing to access in order to prevent competitors from entering the technology market. Smaller firms are presumably easier to integrate into the acquirer and hence their technological assets easier to access. On the other hand, larger targets may provide better access to markets and established products as these firms typically also have a higher market share and a better distribution network. Larger acquisitions should hence also tend to be cross-border rather than domestic. Given this heterogeneity of takeover motivations and the skewness of the distribution of the deal value we investigate whether standard estimation procedures that focus on the average acquisition target in order to unveil the underlying takeover motivation show the complete picture. Based on a comprehensive dataset of 652 M&A transactions in the period from 1997 to 2003, we use quantile regressions to analyze heterogeneity in takeover motivations along the deal value distribution. Our results indicate that the importance of technological assets, measured by the patent stock, is indeed higher for target firms associated with a lower deal value. The findings support the view on smaller acquisitions to complement the acquirer’s technology portfolio while large acquisitions tend to be used to gain access to non-technological assets and to international markets.
Grimpe, Christoph and Katrin Hussinger (2008), Market and Technology Access Through Firm Acquisitions: Beyond One Size Fits All, ZEW Discussion Paper No. 08-037, Mannheim, published in: New Perspectives in International Business Research. Download