Key Points about Mergers and Acquisitions and Technology from MIT Sloan Management Review
The winter 2025 edition of our magazine delves into various topics like enhancing work design, implementing AI, boosting employee engagement, and more. Mergers and acquisitions (M&A) serve as a significant growth strategy for businesses, and it is anticipated that there may be an increase in M&A activity due to the expectation of more lenient antitrust regulations under the new U.S. administration. For companies focusing on technology, recent academic research reveals crucial findings that should guide decision-making for leaders when considering M&A opportunities.
1. Technology deployment benefits from consolidation-driven mergers. The impact of mergers on a company’s technological advancement hinges on the motivations behind the merger. Research in the U.S. telecommunications sector indicates that mergers driven by consolidation and market exploitation motives have a positive influence on technology deployment within the merging entities. Conversely, mergers primarily motivated by financial gains have a negative impact on technology adoption outcomes. Companies aiming to stay competitive in technology should carefully evaluate the reasons behind their M&A strategies to ensure positive technological growth.
2. Nonexecutive employee ownership influences M&A choices. “Acqui-hiring” is a strategy employed by tech companies to acquire valuable talent. However, key employees often depart after a merger or acquisition, potentially undermining the intended benefits. Nonexecutive employee ownership significantly affects target selection in high-tech M&As, with firms having higher levels of nonexecutive employee ownership being more attractive acquisition targets. Employee ownership can lead to smoother integration processes as employees with a stake in the new entity are less likely to leave and are more aligned with the company’s objectives, fostering support for the merger.
3. Unique technology portfolios enhance acquisition appeal. Companies with distinct technology portfolios are more likely to be targeted for acquisition compared to those with less unique technology offerings. The probability of being acquired is higher for companies with the most unique technology portfolios, especially by close competitors in the same product market segments. Acquiring such companies helps in reducing competitive threats and strengthening the acquirer’s market position. Moreover, companies with unique technologies are better positioned to understand, assess, and integrate the acquired technology effectively.
In conclusion, the relationship between technology and M&As is significant, with various factors influencing decision-making in this context. Understanding the implications of motivations behind mergers, the role of employee ownership, and the value of unique technology portfolios can help technology-focused companies navigate the landscape of M&A opportunities strategically.
