New research from Queen Mary, University of London, shows that the M&A (Mergers and Acquisitions) market plays a crucial role in figuring out how much technology is worth.

This study explains that when companies merge or buy each other, they share important information about the value of their technology. This helps both the people in the tech industry and the wider market understand what technology is worth.

The research aimed to answer two main questions: First, how much do these mergers and acquisitions tell us about the value of technology that’s interesting to other tech companies? Second, how does this information-sharing process work?

Technological worth

This study looks into the tricky task of figuring out how much technology is worth, which can be complicated because tech companies often don’t want to share their secrets due to competition.

“Technology overlap between two firms is a unique economic relation, independent of relations due to product market, supply chain and geographic location. Value relevant information can transmit through technology links across firms, providing more precise assessment of technology that is otherwise difficult to obtain,” the authors explain.

“Technological innovation forms an essential driver of business success and economic growth, but the value of innovation is often elusive.”

Disrupting competition

According to the research, acquisitions do not disrupt healthy industrial competition. On average, customers of acquiring companies do not experience negative abnormal returns, even in deals that are typically considered “killer acquisitions.”

The authors emphasize the significance of recognizing that acquisitions, particularly when linked to technology, play a vital role in the transmission of information. This understanding holds great importance for firms when shaping their strategies for mergers and acquisitions (M&A) and innovation.

“Firms that aim to undertake acquisitions would find this knowledge particularly important in the target selection and valuation processes. It would also inform firms’ anti-merger policies to adapt to the landscape changes brought about by acquisitions of technologically close firms,” the authors conclude.