Determinants of the performance of firms that engage in High-Tech Mergers and Acquisitions

The high-technology sector is characterized by high Research and Development costs, high risk, and an everlasting challenge to keep innovating. The nature of this industry makes it an environment in which the possible benefits resulting from a merger or acquisition, such as synergy effects, are self-evident, at least in theory. Whether mergers succeed in realizing the prospected results, is the topic of this paper. More specifically, this paper examines the short-term abnormal returns of acquiring and target firms that engage in a merger or acquisition, as well as the driving factors behind these returns. Acquiring firms earn, on average, a negative return of 2.35 percent, compared to a positive return of 27.2 percent earned by target firms. For acquiring firms, only the payment method plays a significant role in determining these returns. For target firms, the payment method, its equity value and its size, relative to the acquiring firm, all turn out to significantly affect the returns.