Firm Valuation Effects of High-Tech M&A: A Comparison of New Ventures and Established Firms

Abstract

We examine whether the unique attributes of new ventures lead these firms to experience different M&A outcomes vis-a-vis established organizations. Drawing from a sample of acquisitions of high-technology firms, we present results showing that newly incorporated acquirers experience lower average performance in general, as well as when the target is itself a new venture. Yet, we find that new ventures outperform established firms when the target is a privately-held company. Overall, the findings demonstrate that the challenges and opportunities of firms shift through the first few years of their existence and these changes directly affect the M&A outcomes of acquirers.

Keywords: Entrepreneurship, high tech, acquisition, performance

JEL Classification: G3, M13