The upside-down world of value capture. Do companies in technology sector follow the principles of profitable growth?

The Journal of the New Economic Association. 2024. Vol. 62. No. 1. P. 171–195.

V. S. Vinogradova

The technology sector has been showing a constant increase in the number of M&A transaction over the last years, setting record in both deal volume and value. For many com- panies, this is the only way to obtain the unique resources and build capacity necessary to succeed in the fast-paced business environment. The current paper investigates whether the strategic deals, which have been driving the technology sector over the last decade, can be considered value-creating and had a positive impact on the acquirers’ long-term financial performance. To analyze the changes in the performance of bidding companies both univariate and multiple- regression analyses were performed. The results show that overall the acquiring companies could not achieve profitable growth and fully capture value and the benefits of M&A. The acquirers showed rather a deterioration in post-acquisition profitability, efficiency, and growth. The focus (international and industrial) was associated with the best results in terms of both profitability and growth, while the largest increase in post-event growth rates was achieved by the companies from the emerging markets and in the first years following the completion of the deal.

Keywords: growth strategy, information technology sector, M&A performance, shareholder value creation