Exploring the Influence of Technology M&A through Patents, R&D Spending, and Market Valuation

Abstract

In recent years, technology mergers and acquisitions (M&A) have played a large role in disrupting the technology industry and the U.S. stock market. The first part of this paper details how patents used as a proxy for technological assets increase the positive association between the firm's market value and research and development (R&D) spending in the event of an M&A transaction. The results indicate that the same holds true for non-technology firms. The second hypothesis concludes that a technology M&A transaction with high patent value negatively influences the effect of R&D spending on future profitability of a technology acquirer. For a non-technology acquirer, there is no impact on the future profitability of a firm. The third part studies technology M&A activity as a predictor for U.S. stock indices and treasury yields and finds that both daily deal value and deal volume for M&A transactions consistently positively impact the return of the NASDAQ, S&P 500, and NYSE. For treasury yields, the results indicate that the presence of M&A activity negatively impacts the yields of securities, especially ones with longer maturities.