On the importance of technological relatedness: SMEs versus large acquisition targets

This paper empirically investigates a sample of German domestic merger and acquisitions (M&As) in the 1990s to analyze the importance of a related technology portfolio in the decision to acquire a particular firm. The novelty of this analysis lies in the fact that the sample does not contain exclusively large firms, but also a large share of small and medium-sized enterprises (SMEs). The empirical results suggest that firms engage in M&As to strengthen their technological competencies. A related technology portfolio is, in particular, important for the decision to acquire SMEs. This suggests an information advantage of acquirers with related technologies.