Are Mergers and Acquisitions Boosting Company Performance in the Technology, Media and Telecommunications Sector?

Journal of Corporate Finance Research. 2024. Vol. 18. No. 4. P. 51–65.

Kostochko A., Grigorieva S.

TMT (Technology, Media and Telecommunications) companies account for the largest number of M&A deals worldwide. This  stems  from  their  need  to  constantly  evolve  due  to  their  high  dependence  on  technological  change.  Participation  in  M&As is one of the fastest and most strategically promising ways to accelerate product development, gain access to new technologies, and increase competitive advantage. More than 60% of M&As are unsuccessful and do not contribute to com-pany value creation. Will this conclusion hold for TMT companies, characterized on the one hand by rapid development and high growth rates, and on the other hand by high risks? This paper aims to assess the impact of M&As on the operating performance and value of TMT companies. In contrast to previous literature, it evaluates the M&A performance of TMT companies over the long term by applying an accounting studies logic and an economic profit model. It also contributes to identifying the specific factors that influence the success of TMT M&As. Analyzing a sample of 203 TMT M&As completed between 2003 and 2018, we observe a positive impact on the operating performance (2.2% increase in EBITDA/Sales) and value (+$16.3m in Economic profit) of the combined companies. M&As paid for in stock outperform those paid for in cash, confirming the investment opportunity theory. Domestic M&As are the most efficient due to cultural similarities. We also find a negative impact of the acquirer’s R&D intensity on post-M&A performance due to the technology substitution effect. Our findings will be useful to managers and boards for deciding whether to participate in TMT M&As and in understand-ing the factors that influence the success of these deals.

Keywords: value creation, создание стоимости, operating performance, операционная эффективность, экономическая прибыль, economic profit, technological deals, технологические сделки

Publication based on the results of: Corporate financial decisions within the framework of sanctions imposed on companies and individuals (2024)