Three Things to Know About M&As and Technology
Here’s what recent research says about the impact of technology on mergers and acquisitions, and vice versa.
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Mergers and acquisitions are a key growth strategy for companies — and we may see an uptick in such activity, given expectations of less-stringent antitrust regulation from the new U.S. administration. For technology-focused companies, here are three findings from recent academic research that should inform their leaders’ decision-making as they consider M&A opportunities:
1. Mergers driven by consolidation boost technology deployment. Do mergers boost companies’ technological progress? It depends on the motives behind the merger, according to researchers. A study of mergers in the U.S. telecommunications industry found that those driven by consolidation and market exploitation motives have a positive effect on technology deployment at the merging companies. In contrast, mergers undertaken primarily for financial motives, which is more frequently the case, have a detrimental effect on technology deployment outcomes. Leaders who want to maintain a competitive edge in technology might want to consider their reasons for pursuing an M&A strategy.1
2. Nonexecutive employee ownership influences M&A decisions. “Acqui-hiring” is a common strategy tech companies use to bring valuable talent into their organizations. But it’s also common for key employees to leave a company following a merger or acquisition, which can defeat the motive behind the move. This dynamic is what causes nonexecutive employee ownership to play a significant role in the target selection process for high-tech M&As. Companies with higher levels of nonexecutive employee ownership are more likely to be acquired because employees with an ownership stake in the newly formed entity are less motivated to leave. Furthermore, nonexecutive employee ownership can facilitate smoother integration processes, since employees are more likely to be aligned with the company’s goals and more willing to support the merger.2
3. Unique technology portfolios make companies attractive acquisition targets. The probability of acquisition for companies with the least-unique technology portfolios is 7%, but it rises to 20% for those with the most unique technology portfolios. These companies are especially attractive to close competitors within the same product market segments, given that acquiring them can help reduce competitive threats and strengthen market position. Additionally, these acquiring companies are better equipped to understand, value, and integrate the unique technology.3
References
1. S.K. Majumdar, R. Moussawi, and U. Yaylacicegi, “Merger Motives and Technology Deployment: A Retrospective Evaluation,” The Antitrust Bulletin 65, no. 1 (March 2020): 120-147.
2. W. Shi, J. Li, and G. McNamara, “Non-Executive Employee Ownership and Target Selection in High-Tech Mergers and Acquisitions,” Journal of Management Studies 61, no. 5 (July 2024): 2033-2071.
3. S. Arts, B. Cassiman, and J. Hou, “Technology Differentiation, Product Market Rivalry, and M&A Transactions,” Strategic Management Journal, Early View, published online Jan. 3, 2025.
